Nasdaq Plans to Launch Bitcoin Futures Contracts in Q2 of 2018

It is just the matter of past 24 hours that Bitcoin crossed the much awaited $10,000 mark with a record-breaking 1000% jump in its price since the start of 2017. Overall this year has been phenomenal for the cryptocurrency markets which is currently trading at record valuations with a total cap of $325 billion, with Bitcoin alone contributing above 50% and $178 billion in the total cap.

One interesting fact we can make out from the yearly charts of Bitcoin is that the currency has doubled in its price in just past two months from the start of November. The trigger for this rally was provided by CME Group’s announcement of starting Bitcoin futures contract. The World’s largest derivative marketplace has announced to start Bitcoin futures contract from December second week, which is now the next week, and has also listed down the terms and specifications for the contract. In addition, the Chicago Board Options Exchange (CBOE) has also announced to start Bitcoin derivatives in 2018.

Joining this club, and being the third major U.S exchange to offer Bitcoin derivatives, Nasdaq Inc is planning to introduce Bitcoin futures contracts to its customers by the second quarters of 2018. These Bitcoin futures contracts will be listed on Nasdaq futures and will be open to investors associated with traditional stock brokerages to participate in Bitcoin trading.

Bitcoin currently trades in the completely unregulated marketplace. The participation by these three giants which are regulated markets are expected to reduce the huge amount of volatility in Bitcoin price movements thereby bringing stability. This is expected to install more confidence in professional investors and thus bring a lot of liquidity in the markets.

As per Reuters, Nasdaq has approached a New York-based money manager VanEck to develop the Bitcoin futures contract. After getting a clearance from Options Clearing Corporation, which also clears other Nasdaq products, Nasdaq will proceed ahead with its further plans.

However, the Nasdaq futures contracts will be differing from CME and CBOE contracts in a way that is be based on an index taking Bitcoin prices from 50 other Bitcoin exchanges. While in case of CME, it will be based on CF Bitcoin Reference Rate (BRR) which is a one-day reference rate of the U.S. dollar price of bitcoin, and currently takes the Bitcoin price from four exchanges. On the other hand, CBOE takes the Bitcoin price from a single source - Gemini Trust.

Also one of the major questions with the Bitcoin products is that what happens in case of “hard fork” i.e. when Bitcoin splits into two competing coins. Nasdaq has clarified that in such case, both the products of the fork will be available in the same index for a day. On the next day, the value of the split coin will be reinvested in original Bitcoin and the value of index will be adjusted accordingly.

Suppose Bitcoin which is trading at say $10,000 and splits into two coins of value $8,000 and $2,000, then for one day both will remain in the same index. On the next day, $2000 coin will be re-invested in $8,000 fork coin and the index will be adjusted.

Bitcoin after touching $10,000 has managed to further surge over 10% and has crossed $11,000 hitting a high of $11,432.667 as per our data.