Derivatives on the Horizon

Many investors have struggled with entering the cryptocurrency space due to lack of liquid derivatives markets in which they can hedge their positions. In recent weeks, two major announcements were made suggesting the emergence of derivatives trading ahead.

The Commodity Futures Trading Commission (CFTC) granted registration to LedgerX to perform settlements of derivatives contracts using digital currencies. Expectations are high that this move by the CFTC will enable LedgerX to build out a liquid derivatives exchange in short order.

Also, the Chicago Board Options Exchange (CBOE) recently entered into an agreementwith Gemini, a New York-based cryptocurrency exchange, whereby the CBOE now has exclusive license to use Gemini data to develop Bitcoin derivatives and indices. As part of the announcement, the CBOE plans to make available Bitcoin-based futures on their Commodity Futures Exchange in late 2017 / early 2018 alongside their existing traditional derivatives.


Both moves are strong steps in the direction and progression towards a robust cryptocurrency derivatives market for investors. In addition, the engagement and ultimate approval of a major US regulatory agency (CFTC) and a substantial player in the traditional commodity trading arena (CBOE) for cryptocurrency-based trading instruments marks a significant milestone in the overall adoption of cryptocurrencies as an alternative investment vehicle for well-informed investors.

BlockIntel remains bullish on the prospect of more institutional capital entering the cryptocurrency space. The overall market has grown from USD 20 billion in January of this year to USD 135 billion today (roughly seven months!), with USD 15 billion added in the last couple of weeks alone.  These two moves are the most recent to regulate and legitimize cryptocurrency options for traditional investors, further stoking the hype for what is emerging. We do not see any signals to suggest that this capital inflow will abate any time soon.

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