New York Stock Exchange owner launches futures contracts that pay out in bitcoin
- The first trade in the new bitcoin futures contracts was executed Sunday at 8:02 p.m. ET.
- The futures are physically deliverable, meaning they pay out in bitcoin upon settlement.
- Bakkt, the firm behind the derivatives, is backed by ICE, Microsoft and Boston Consulting Group.
Intercontinental Exchange, the owner of the New York Stock Exchange, launched its bitcoin futures contracts late Sunday, in a move aimed at enticing investors who have hesitated about trading the cryptocurrency.
The first trade in the new contracts was executed on ICE's futures exchange at 8:02 p.m. ET at a price of $10,115, Bakkt, the firm behind the contracts, said in a Twitter post. Bakkt is an ICE-backed venture which aims to make trading and paying with cryptocurrencies viable for retail and institutional investors alike.
The futures are physically deliverable, meaning they pay out in bitcoin upon settlement. That's different to ICE competitor CME Group, which introduced its own futures contracts for the digital currency in 2017 which paid out in cash. Physical settlement is used for other markets like bonds, oil, cattle and metals.
Cryptocurrency fans will hope ICE's bitcoin futures, which are federally regulated, can provide some much-needed legitimacy to an asset class that has been mired in controversy following illicit activity in the still nascent industry.
Bitcoin is also known for its wild volatility — for example, a late 2017 bubble which saw prices rise close to $20,000 burst the following year. Since then, the cryptocurrency has been on the rise this year, with experts attributing the price jump to big firms like ICE and Facebook, with its planned libra cryptocurrency, getting involved in the space.
Futures contracts, legal agreements to buy or sell a commodity at a certain price and time, are a way for investors to bet on whether the underlying asset's value will rise or fall. In the ICE's case, investors can trade in daily or monthly futures, according to its website.
Bakkt, which partnered with ICE to launch the derivatives, also counts Microsoft venture arm M12 and Boston Consulting Group as investors. The company teamed up with coffee chain Starbucks last year to allow people and institutions to buy, sell, store and send cryptocurrencies.
Attempts at launching bitcoin futures have been faced with problems in the past. Cboe Global Markets, which launched its own contracts in late 2017, said earlier this year that it would stop adding new ones. Meanwhile, U.S. firm LedgerX was forced to backtrack from a launch of physically settled bitcoin futures after a key markets regulator said it had "not yet been approved."
ICE's move was met with a mostly tepid reaction in spot markets, with bitcoin's price rising just 0.5% higher to about $9,950.