NASDAQ has been teasing since late last year that it will unveil a bitcoin futures contract, and now we know a little more about how it will work once formally released.
Bitcoin’s future pricing is the stuff of hot debate, with strong arguments being made that it will will either soar to new heights in 2018 or crash irreparably. Futures players will be able to place bets on the rise and fall of the volatile cryptocurrency, profiting when they set savvy forward prices. Futures trading is perhaps where fantasy football meets the market—the only thing people love more than being right about a prediction is making money from it.
NASDAQ is not the first trading entity to dip its toe into the cryptocurrency market, but it’s certainly got the most recognizable name for retail investors. The Chicago Board Options Exchange and the CME Group—the world’s largest futures exchange—are already active in bitcoin futures. They pull price information from one source and from four sources, respectively. NASDAQ’s futures contract, meanwhile, is expected to use data coming from 50 different bitcoin sources from around the world. That will either paint a fuller, higher-resolution picture of how and why bitcoin prices move, or increase the currency’s overall volatility depending on the liquidity of the individual markets that will be providing data.
Businesses have made moves frivolous and meaningful alike to ride the blockchain hype, but now, an institutional financial entity most known for its equity exchange wants in. Rich Repetto, an analyst at Sandler O’Neill & Partners LP, ascribes NASDAQ’s cryptocurrency thrust to the same speculative drive fueling the everyday bitcoin trader. Speaking to Bloomberg in November, he said, “[NASDAQ is] a small futures exchange, so they possibly see the potential to get into a product that could be much larger someday.”
Despite widespread speculation of bitcoin one day reaching untold values, other finance players are issuing sentiments to the effect of “no bitcoin, not now, not ever.” Vanguard CEO Tim Buckley made headlines this week for his stern denouncement of the virtual currency. Echoing Jamie Dimon’s high-profile critique of bitcoin as “a scam,” Buckley said, “We tend to stay away from assets that don’t have underlying economic value. They don’t generate earnings or cash flows[…] It’s really tough to imagine where the long-term return comes from other than speculation.”
Just as there is no consensus on bitcoin’s future price performance, there is no consensus on what role bitcoin should play in modern transacting. Financial thought leaders may come out very much against bitcoin while formal trading entities investigate ways to implement it and create new investment products.
There’s no known timeline for when this will be introduced, but the attention is firmly pointed at the second half of 2018.