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Gillian Tett: Prepare to bet against bitcoin as it becomes civilized

Section: Daily Dispatches

By Gillian Tett
Financial Times, London
Friday, November 17, 2017

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. ...

Until now, investors have not had an easy way to bet against bitcoin -- the only "short" was to sell coins. But the CME futures contract will let investors place those negative bets.

You do not need to be a conspiracy theorist to imagine that some bitcoin cynics will be doing just that. ...

Until now, bitcoin has essentially been perceived as a ringfenced product. The unstated assumption among investors has been that it occupied a distinctive space where normal investing rules did not apply. But as bitcoin becomes integrated into the derivatives market, that boundary may break down and investors apply for "normal" criteria in their valuations. Given the unresolved questions about how bitcoin works, that may lead to more scepticism; indeed, it is precisely what has often happened in the evolution of financial markets before. ...

... For the remainder of the report:


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