We’ve talked a lot here about Jamie Dimon and his disapproval of bitcoin. In September, JPMorgan’s Chief Executive called the cryptocurrency a “fraud” and threatened to sack any employee he caught trading bitcoin for being “stupid.”
But Dimon isn’t the only voice in the financial establishment that has had something to say about bitcoin. Also in September, CME Group President Bryan Durkin told Bloomberg that he didn’t see the company “going forward with a futures contract in the very near future” for bitcoin.
But my have things changed quickly. Tuesday, CME Group announced its plans to list bitcoin futures contracts by the end of 2017.
Currently, if an investor wants to bet on the price of bitcoin, their only real option is to buy bitcoin. This potentially inflates the price of bitcoin, and makes it more difficult to determine its true value. One expert even estimates that roughly a third of bitcoin transactions could just be traders swapping it, giving the impression that it is used more as a medium of exchange than it actually is.
The other issue with bitcoin is that bitcoin exchanges are plagued by hacks, an issue CME’s bitcoin contract will avoid by trading and settling in dollars, if not somewhat ironically, so that traders can bet on the price of bitcoin without the fear of the bitcoins in their account being hacked.
CME’s listing of a bitcoin futures contract isn’t just good news for individual investors looking to get in on the moves of the digital currency without actually buying it, people who make transactions in bitcoins will want a place to hedge the currency as well. Excluding trading, $350 million in transactions using bitcoin have been completed on average each day for the last six months, and that number has been closer to $800 million more recently.
As the financial establishment continues to recognize bitcoin as a legitimate asset, others will follow CME in treating it like one. Goldman Sachs for one is already looking at how to start a bitcoin trading operation, and even Jamie Dimon’s own JPMorgan Chase is betting big on the blockchain technology behind bitcoin.