A huge jump in value has sparked interest in the cryptocurrency Bitcoin. The value of the currency has climbed to 11 times its original value. The price on Wednesday rose to over $11,000. Seeing the price of the currency jump, another major exchange will be offering the option to purchase futures of the cryptocurrency.
NASDAQ will be joining both CME Group Inc. and CBOE Global Markets Inc. as the third major exchange to offer futures on Bitcoin. This means that three out of the four major exchanges will now be trading in this lucrative currency. The only other major exchange market to not offer futures on Bitcoin is the New York Stock Exchange.
Futures are a type of trade where a commodity or currency is given a value for a future trade.
If you need to pay for services or items using Bitcoin, you can use a future to lock in the exchange ratio, therefore, setting your purchase price, according to a former public accountant said.
The flip side to futures is that if the price swings a favorable way for either the purchaser or the seller, there would be less of a profit on either side. This could mean that the crazy swings in Bitcoin prices could calm down.
A way that NASDAQ wants to differentiate itself from its other competitors is to collect a massive amount of data on the currency to offer a more accurate price. VanEck Associates Corp. is a global investment firm. They originally planned to open an option for purchasing this new currency in the markets but withdrew. NASDAQ is currently in negotiations for having them pull data from 50 different sources to add legitimacy to their futures contracts. This is more than the two other competitors. CME plans to have four different sources while CBOE only plans to have one.
Bitcoin is currently traded in virtually unregulated markets. The addition to the three major exchanges adds more legitimacy to trading this currency. With having more legitimacy, professional investors are more likely to invest in Bitcoin. Trading on a major exchange also adds security to trading the online currency.
Bitcoin is not the only cryptocurrency, but it is the most popular one. Some other currency options include Litecoin, Ethereum and Zcash. Litecoin was one of the first cryptocurrencies along with Bitcoin. It was founded back in 2011 by an MIT graduate and a former Google engineer. Something that Litecoin has over Bitcoin is that the nature of it provides faster proof of transaction. Its currency is protected by “scrypt,” which is decoded by consumer grade CPUs to help make it more viable for everyday consumers.