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NEW YORK (InsideBitcoins) — The volatility of Bitcoin has been an issue addressed with many possible solutions. Now, one of the tools fiat currency traders employ is becoming available to holders of the cryptocurrency: a futures market.
The ability to “lock in” a price of bitcoin with a futures contract may help reduce exposure to volatility for investors with large exposure to the digital currency. OKCoin, one of the world’s largest bitcoin exchanges, has announced a beta release of its futures trading platform.
“We continue to build the bitcoin trading platform of the future, bringing institutional and professional trading tools to digital currency investors,” said Star Xu, founder and CEO of OKCoin in a release. “Today’s launch of bitcoin futures trading capabilities builds on the algorithmic trading tools we pioneered and launched on our platform last month. We have already seen a favorable response from institutional and individual investors. We are helping to make participation in Bitcoin a more safe and stable process.”
Beijing-based OKCoin says miners and merchants may be among the most prevalent users of the futures exchange, as they attempt to hedge the risk of their holdings in bitcoin. Investors will be able to utilize higher leverage opportunities for price speculation. Derivatives trading may allow for decreased volatility and an increased predictability of bitcoin prices.
“To ascertain that we are gathering accurate pricing data, OKCoin will be using a comprehensive USD price index derived from prices on 10 different bitcoin exchanges,” said Changpeng Zhao, OKCoin’s chief technology officer. “The ability to trade futures allows investors to minimize risk in bitcoin trading, a major factor to bitcoin’s increasing adoption.” Zhao previously served as head of research and development for Bloomberg Tradebook Futures in New York, as well as head of development for Blockchain.info.
The futures trading exchange will undergo a two week beta test before going live.
iCBIT.se, a Russian-based site, claims to have been offering derivatives trading on bitcoin since 2011, but offers no physical address and a notice on its “About” page that has been posted for well over a year saying, “”ICBIT currently is in process of incorporating in an offshore jurisdiction. If you are a lawyer willing to help us — please let us know, we need your help.”