Bitcoin’s wild ride: Now comes futures trading

On Sunday, the exchange began offering options to bet on something very different: bitcoins.

Why is it different? With stocks and commodities, there’s an underlying asset. For stocks, it’s a company and the goods or services they produce. For commodities, it’s the actual item, like oil, fruit or copper.

With bitcoin, there’s nothing like that. Unlike traditional commodities, there’s not a physical asset behind it. And unlike currencies, there isn’t a central bank ready to back bitcoin up.

Bitcoins live on computer servers. They are produced by complex algorithms and recorded in a digital ledger.

The U.S. Commodity Futures Trading Commission, which certified bitcoin futures for trading, acknowledged the unprecedented step taken by the Chicago Board Options Exchange.

Bitcoin “is a commodity unlike any the commission has dealt with in the past,” CFTC chairman J. Christopher Giancarlo said in a statement December 1.

There’s more to come. Bitcoin futures will also begin trading on the Chicago Mercantile Exchange on December 17-18, while the Nasdaq will debut the options sometime next year.

Bitcoins are bought and sold on unregulated virtual exchanges — and it’s been extremely volatile.

The price of a single bitcoin recently soared on some exchanges from less than $10,000 to $17,000 before dropping back to near the $15,000 mark, spurring renewed warnings of a bubble.

Nobel laureate Joseph Stiglitz told Bloomberg TV that the currency “ought to be outlawed.”

But some people — particularly in the hedge fund world, where there’s a healthy appetite for risk — say bitcoin futures present an opportunity.

Futures are contracts that let investors buy or sell something at a specific price in the future — in this case, bitcoin. Trading in futures contracts makes bitcoin more accessible to fund managers who don’t want to own bitcoin directly but do want to speculate on whether it will go up or down in price…

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