It’s no secret that the price of bitcoin has fluctuated wildly in recent weeks, but this volatility may end if the world’s largest futures exchange, CME, implements price fluctuation limits on its planned bitcoin futures product. CME is aiming to avoid trading outside the 20 percent range by limiting movements at 7 percent and 13 percent above or below the last settlement price, similar to the ranges afforded to U.S. stock index futures.
Interest in bitcoin has surged recently as prices have risen steadily, but concern has mounted as several days of steep losses have shaken the market. In September, for example, bitcoin fell from over $5000 to below $3000, a 40 percent decline in only two weeks. By November, however, the cryptocurrency was trading above $7600.
If implemented, the limits would limit the potential upside for traders, but would also reduce concerns about devastating losses should the cryptocurrency’s value swing strong to the downside. CME has announced that it will launch bitcoin futures by the end of 2017, pending confirmation from the U.S. Commodity Futures Trading Commission (CFTC). Trading is scheduled for 6 p.m. EST to 5 p.m. EST Sunday to Friday on ClearPort, CME’s over the counter market, and on Globex, CME’s electronic trading system.
Cryptocurrency trading is also available in over 120 ‘cryptofunds’, many of which have been developed by Wall Street veterans looking to take advantage of the popularity of cryptocurrencies, and some of which were developed by Forex brokers. Though once considered a risky investment, cryptocurrencies seem to be on the way to becoming a mainstream investment opportunity.