For the first time in history, Bitcoin futures contracts have been exchanged for actual Bitcoins, which is known as an exchange for physical (EFP) in the futures markets. The trade was facilitated by itBit, headquartered in New York City and the home of Wall Street, and the registered futures commission merchant ED&F Man Capital Markets. Up to now all Bitcoin futures contracts trading was done for cash.
This is an important milestone since it shows that Bitcoin futures can legally be exchanged for actual Bitcoins by institutional investors. This creates a direct connection between the Bitcoin futures markets on CME and CBOE and the Bitcoin markets that trade actual Bitcoins. Essentially, Bitcoin futures contracts can now be used instead of cash to purchase Bitcoins. This could drive Bitcoin prices upwards since it will increase demand in the Bitcoin markets that trade actual Bitcoins, especially since Bitcoin futures trading volume is rapidly increasing.
Brooks Dudley from ED&F Man Capital Markets says, “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.”
This first Bitcoin futures EFP is probably happening now because the Bitcoin market is in a strong rally that has taken it from USD 6,200 to USD 8,500 during the month of July 2018. This gives Bitcoin futures traders good incentive to go long on Bitcoin, and the best way to go long on Bitcoin is to hold actual Bitcoins since Bitcoin futures contracts are settled for cash once a month, depending on the month the contract expires.
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Image Courtesy: Zachary, Bitcoin News
