Bitcoin Futures Trading Will Send Prices to $50,000 in 2018

Bitcoin futures trading will play a key role in pushing the price of the cryptocurrency as high as $50,000 next year.

Bitcoin futures trading started at the CBOE Global Markets Inc. (Nasdaq: CBOE) on Dec. 10 and on the much larger CME Group Inc. (Nasdaq: CME) on Dec. 18. Nasdaq Inc. (Nasdaq: NDAQ) plans to begin trading Bitcoin futures in the first half of next year.Bitcoin futures trading

Further big rises in the price of Bitcoin - currently trading at around $17,000 - may seem far-fetched given the 1,700% increase it's had in 2017.

But while another 1,700% gain in one year would be a stretch, the Bitcoin price should have enough of a tailwind to triple or even quadruple in 2018.

A lot of that tailwind will result from Bitcoin futures trading, both directly and indirectly.

"I think that Bitcoin being listed on two reputable exchanges gives a great deal of reputation to the product itself and I think as a result it will become even more popular than it's been before," Interactive Brokers Chair Thomas Peterffy told CNBC Monday.

Futures trading has already had a major impact on the price of Bitcoin.

Consider what's happened over the past four months...

Investors Saw Bitcoin Futures Trading as a Positive

The first serious rumblings that Bitcoin futures were on the way came during the summer. CBOE announced its intent to trade Bitcoin derivatives in August. At the time, the price of Bitcoin was hovering around $2,700.

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That was certainly a factor in helping push the Bitcoin price higher in August and September.

But the real trigger came Oct. 31, when CME, the world's largest futures exchange (it has three times the trading volume of CBOE), announced its intention to launch Bitcoin futures trading.

The price of Bitcoin rose more than 5% that day, from $6,122 to $6,447. And that was the start of a seven-week run, in which the Bitcoin price has tripled.

price of Bitcoin

What's interesting about this is that some Wall Street pundits predicted that futures trading would push the Bitcoin price down, since it would make it much easier for deep-pocketed players to short the cryptocurrency.

And yet, the opposite has happened...

Bitcoin Futures Trading Has Pushed the Price to All-Time Highs

Since Bitcoin futures trading began, the price has edged to new highs, rising as far as $19,783.21 on Dec. 17.

So far, more Bitcoin futures traders are betting long than short - surprising for a commodity that many Wall Street leaders, including JPMorgan Chase & Co. (NYSE: JPM) CEO Jamie Dimon, consider a bubble.

Today (Wednesday), Bitcoin futures contracts were trading $300 to $700 above the spot price on CBOE and $500 to $1,000 higher on CME. The difference of 1.6% to 5.56% is unusually large for short-term futures, which typically trade within 1% of the spot price of the underlying commodity.

It suggests that investors were right in the months leading up to futures trading - it's a positive for the Bitcoin price.

And it's just getting started. Volume has been thin in the early days, but it is expected to pick up in the weeks and months ahead as the market evolves. Many traders have been eagerly awaiting this opportunity.

Institutional investors have been unable to trade Bitcoin in any form, because it's unregulated. Futures trading on the CBOE and CME changes that.

"The demand for the asset remains highly elevated and the fact that you can now trade it on an exchange means it's open to a wider audience," Jordan Hiscott, chief trader at Ayondo Markets Ltd., told

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As the Bitcoin futures market matures, short trading should pick up, but it's hard to envision it outpacing those betting on the cryptocurrency's continuing rise.

That will keep upward pressure on the price of Bitcoin through most of next year.

But allowing heavyweights to take part in the Bitcoin market isn't the only reason futures trading will boost the Bitcoin price in 2018.

Futures trading opens the door to something that arguably will have an even more dramatic impact on the price of Bitcoin...

This Will Power the Bitcoin Price to $50,000 in 2018

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The game changer in 2018 will be the approval of the first Bitcoin exchange-traded fund (ETF).

A Bitcoin ETF will open up the cryptocurrency to a much wider range of investors - those who want exposure to Bitcoin without the hassle of buying and storing it. The flood of this new money will drive the Bitcoin price tens of thousands of dollars higher.

It's been more than four years since the Winklevoss twins filed the first Bitcoin ETF proposal (the Winklevoss Bitcoin Trust) in July 2013.

But when the U.S. Securities and Exchange Commission (SEC) rejected that proposal in March, it had just one main objection: It was uncomfortable with a commodity that traded only on unregulated exchanges.

Futures trading on the CME and CBOE addresses exactly that concern.

The CEO of CBOE, Edward Tilly, told CoinDesk earlier this month that futures trading would provide the information that "goes into building the next steps. One of those potential next steps would be moving into ETFs and ETNs that would take SEC approval."

It means we're likely to see not just one Bitcoin ETF approved in 2018, but several. The only question is when.

Currently, there are 15 Bitcoin ETFs awaiting approval if you include five blockchain-based proposals.

Bloomberg senior ETF analyst Eric Balchunas told he expects the SEC to move in stages, approving a blockchain-based ETF first, then a futures-based Bitcoin ETF, then finally an ETF backed by bitcoins - the Winklevoss Bitcoin ETF.

Balchunas said the first U.S. Bitcoin ETF will break the record for getting to a $1 billion valuation. The record, held by the SPDR Gold Trust ETF (NYSE Arca: GLD), is three days.

When you combine that with the impact of the futures trading, it's not hard to see the price of Bitcoin tripling or more next year.

"I think we're going to see $50,000 by the end of 2018 for Bitcoin," Kenetic Capital managing partner Jehan Chu told Bloomberg TV. "I think with the one-two-punch of the CBOE and CME, I think the entire world is on watch now for what is to come and what the real liquidity that can enter this market will actually look like."

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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