The door to the launch of bitcoin-based ETFs is now “wide open” for bitcoin ETFs after innovative index provider Solactive announced in late December it had launched an index trading the new crypto-currency future markets launch earlier in the month by the Chicago Board Options Exchange (CBOE).
The news came even as the price of bitcoin hit a wall and slumped up to 30% in the last trading day before Christmas. As of early trading in New York on 22 December, bitcoin was trading for $10,775, down from nearly $20,000 earlier in the week.
Cboe became the first regulated exchange to offer a bitcoin futures market on 10 December and Solactive has been granted exclusive rights to market index calculations.
According to the company, the Solactive Bitcoin Front Month Rolling Futures 5D Index can be used to gain exposure to the bitcoin currency through XBT futures contracts that are traded on Cboe’s Futures Exchange (CFE).
It said the index will be available for licensing for ETFs and other structured products.
The Cboe move was followed the rival CME which offered its own Bitcoin futures market a week later.
Solactive suggested that by trading in futures, investors can reduce exposure to some of the volatility associated with the digital currency.
Steffen Scheuble, chief executive at Solactive, said the Bitcoin opportunity was “unprecedented in history of capital markets”, adding that the new index “clearly opens the door” for more bitcoin-based products.
“The world is becoming more and more digitalized,” he added. “Technology is affecting all areas of finance, including payment systems, wealth management with robo-advisors, and now currency with the rise of cryptocurrencies.”
The final hurdle to a bitcoin ETF might be one of extreme volatility. In the fortnight following the launch of the CBOE future contract, the bitcoin price has seen violent swings as the froth surrounding the market continues to build.
In the final days before the Christmas break, the price of the crypto-currency on various exchanges dropped by 30%. Amid warnings from both the Bank of England and the Financial Industry Regulatory Authority in the US, there have been stories emanating of potential fraud at major San Francisco exchange Coinbase and of a crypto-heist at a South Korean exchange.