The Chicago Board Options Exchange, Cboe, released a statement today detailing their plans to cease offering contracts covering bitcoin futures beginning this month.

CFE is not adding a Cboe Bitcoin (USD) (“XBT”) futures contract for trading in March 2019. CFE is assessing its approach with respect to how it plans to continue to offer digital asset derivatives for trading. While it considers its next steps, CFE does not currently intend to list additional XBT futures contracts for trading.

–  Cboe statement 3/14/19

Cboe stops offering futures contracts for bitcoin while CME continues on

Cboe and Chicago Mercantile Exchange, CME (NASDAQ:CME), launched futures contracts in December of 2017, when interest surrounding bitcoin had reached a fevered pitch that saw the digital currency trading at near $20,000 per coin.

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The two exchanges, both based in Chicago, IL, began trading at similar volumes in the first few months, but due to reasons unknown CME quickly dwarfed Cboe in total bitcoin futures.

CME vs Cboe Bitcoin Futures Trading Volume Source: TradeBlock

CME was doing over five times the XBT volume as Cboe by the end of 2018. Its possible Cboe (BATS:CBOE)admitted defeat and decided to throw in the towel.

Whatever the reason, bitcoin was somewhat strengthened by getting institutional support on the futures market and so losing a platform that offers bitcoin futures contracts is a blow the cryptocurrency.

However, futures can generate some downward pricing pressure on a currency and this pressure will be lifted ever so slightly (not lifted completely as CME is going to continue offering these same derivatives). The main thing to watch out for here is how CME will react in the future. If they simply continue on business as usual, then they will take on the smaller volumes Cboe was doing and life will go on largely unchanged. Should they follow suit and de-list bitcoin futures as well, then we are in for a big impact on the crypto market as a whole.

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With no regulated markets offering derivatives on bitcoin, volatility would increase greatly. Think back to 2016 and 2017 and you may get a clearer picture of what I mean. One of bitcoin’s chief struggles to date has been its troubles in gaining mainstream and widespread acceptance in financial institutions and regulatory bodies. Digital currencies are still in their infancy when it comes to entering “investment grade” conversations, and maintaining a presence on regulated exchanges is going to help move things along into the future.

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Keep in mind that Bakkt, Erisx, and Coinflex have stated they intent to launch bitcoin futures offerings at some point, so Cboe’s quiet withdrawal from the market might just be a ripple in the scheme of things.

 





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