Bitcoin futures are a relatively recent development following regulatory approval at the end of 2018. They allow trading against the future value of Bitcoin but without using exchanges. The introduction of bitcoin futures has provided some interesting developments over the course of this year. Here, we take you through a brief history of bitcoin futures since their introduction and look at what comes next.

What Are Bitcoin Futures?

First, for the benefit of anyone who may be hazy on financial terms, what is a bitcoin future?

In a futures contract, two parties agree to trade a commodity at an agreed price on a future date. So for example, think of a farmer who’s selling grain crops at the start of the growing season. If the price of grain drops between now and when he harvests, he is out of pocket. 

The buyers of his grain are in the same position but on the other side of the equation. If the price of grain goes up, they could find their products selling at a loss.

Futures are a way of protecting against these fluctuations. The buyer and seller agree to make a particular trade for an agreed price and fixed date in the future. The agreement is a legally binding contract whereby parties must conclude the purchase regardless of any winners or losers.

Financial traders use futures as a way of speculating on the future price of an asset. If they believe prices will rise, then buying assets at a fixed future price allows a trader to sell those assets, or the futures contract itself, at a higher price when market rates go up. It’s a risky business and making a profit relies on an in-depth understanding of market fluctuations.

Bitcoin futures work in a similar way. By buying and selling bitcoin futures contracts, investors can speculate on the future value of bitcoin without ever having to actually own the asset.

A Brief History of Bitcoin Futures At Launch

Bitcoin futures had been around for a while before 2018 but traded only on crypto exchanges as unregulated assets. Regulated bitcoin futures were introduced at the end of 2017. Within a single week in December, two prominent futures exchanges, the Chicago Board Options Exchange (Cboe) and the Chicago Mercantile Exchange (CME), both started trading futures based on bitcoin.