Bitcoin

Institutional Investors Swap Bitcoin Futures for the “Physical” BTC for the First Time

Institutional Investors Swap Bitcoin Futures for the Physical BTC for the First Time

The number one cryptocurrency, Bitcoin, has become a one step closer to the mainstream acceptance as a commodity of choice. CCN news site reports, that the first-ever exchange of futures for physicals (EFP) transaction involving bitcoin futures took place. The EFP allowed investors to convert Bitcoin futures of Chicago Mercantile Exchange (CME) and an equivalent amount of the ‘physical’ asset. The transaction was facilitated by a registered futures commission merchant, ED&F Man Capital Markets, and a New York-based bitcoin exchange, itBit.

Two institutional investors executed the transaction in accordance with Rule 538, which applies to any CME equity index. The EFP makes possible a conversion from CME Bitcoin futures and an equivalent amount of the ‘physical’ asset. This normally allows Wall Street traders to differentiate between the financial instruments within one market exposure. ‘Exchange for physicals’ transactions also let institutional-grade customers meet their leverage, capital, tax and liquidity needs.

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The intermediaries of the deal, ED&F Man Capital Markets and itBit, said that the recent transaction marked the first time the CME Bitcoin futures had been exchanged for the physical asset, being cryptocurrency. Brokers are active in the EFP market for the most part in more traditional commodities. Brooks Dudley, of ED&F Man Capital Markets Inc., commented on the trade

“Every day we facilitate EFPs for our clients in physical assets such as soybeans, wheat, and treasuries. EFPs on CME Bitcoin futures mark an important step forward in the maturity of the regulated derivatives market for digital currencies.”

Indeed, the news is indicative of more development towards broader adoption of cryptocurrencies in the financial world. There is evidence of growing interest in Bitcoin futures. The recent report from the CME has shown an astounding 93% increase in trading volumes in the second quarter. During the week, the price of Bitcoin broke the $8000 threshold, which came after a week that saw a 20% upturn on its price. In turn, the reversal in the price trend of Bitcoin seems to have mobilized more institutional investors. The trading volume of Bitcoin has shot up respectively. Some predict that the total market capitalization of cryptocurrencies would reach $800 billion before the end of 2018 once institutional investors enter the field.

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