Prepare to bet against bitcoin as it becomes civilised
If the cryptocurrency ceases to be a ringfenced product, the normal rules of investing will apply.
By Gillian Tett
In recent years, bitcoin has been the wild west of the financial world. Now, however, it is being civilised — a touch. In the coming weeks, the Chicago Mercantile Exchange plans to start listing bitcoin futures, with a centralised clearing mechanism.
Cboe Global Markets may follow suit. That will enable investors to bet on the coin’s future value without actually holding it — just as investors can use the Chicago exchange to bet on hog prices, say, without ever handling a pig.
Is this a good idea? Some of the CME’s members do not think so. This week Interactive Brokers, an important clearing firm in the exchange, took the extraordinary step of using a newspaper advertisement to ask for more regulatory oversight. It fears that bitcoin is potentially so volatile that these futures will create huge losses for traders, which might then undermine the health of the CME and hurt other brokers, given its part-mutualised structure.
The CME — unsurprisingly — dismisses this as poppycock: it argues that any risks will be contained by rules that force traders to post a large initial…
