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Bitcoin Futures Being Swapped for Physical Bitcoin Units


With the current rally gaining momentum, there’s rising institutional interest in Bitcoin. The last week of July is seeing Wall Street traders complete their first ever swap of Bitcoin futures for actual Bitcoin units.

Two institutional investors completed the first ever exchange of the CME Bitcoin futures for actual Bitcoin units. This counts as a major step towards mainstream adoption for Bitcoin.

E D & F Man Capital Markets and itBit cryptocurrency exchange made the transaction possible. They facilitated two traders so they could swap CME Bitcoin futures for the actual Bitcoin with the same value.

Also known as Exchange for Physical transactions, this sort of transaction allows investors to hedge the commodity and futures. It will allow them to have a diverse portfolio exposure for several kinds of assets. This provides many firms with liquidity, capital, or tax benefits. The EFPs get discussed and decided privately. When the settlement is made, they are reported to the exchange.

EFPs are nothing new. They have existed as a financial instrument for the futures and commodities market for a while now. It is just that this is the first time they have been used to process a futures swap with the underlying asset being a cryptocurrency, namely Bitcoin.

A representative of E D & F Man Capital Markets Inc has commented on this trade.

“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.”

With increasing interest by institutional investors, things are changing. Investment firms and hedge funds are going to wait for a shorter period of time when it comes to a regulated market for cryptocurrencies.

Until now, The US Commodity Futures only approved Bitcoin futures being traded for cash once the futures contracts expire. A cryptocurrency-enabled EFP will streamline the transition between digital assets and the mainstream market.

There has been a significant rise in Bitcoin futures trading since the CME group started offering Bitcoin futures trading in December of 2017.

Coinbase, a San Francisco based cryptocurrency trading platform secured a $20 million hedge fund. It plans to use the funds to allow institutional investors to have more options when it comes to their financial services.

The cryptocurrency world is bound to see more institutional capital flowing into the industry if the Bitcoin ETF proposal sees approval. This will also make Bitcoin the second digital asset to be listed on the public markets.