Bitcoin has proved itself to be a valuable investment in the last few months and prices have skyrocketed. Observing this trend, it is only logical that everyone would like to cash in the opportunity of trading Bitcoin. However, as profitable as Bitcoin may be, it is still very risky. The price of Bitcoin tends to fluctuate depending on the news surrounding the currency. If a rumor is published, the price of Bitcoin tends to fall even before the rumor is validated or disproved. This was observed when rumors regarding the cryptocurrency ban in China were heard; Bitcoin took a substantial hit, loosing considerable value in a matter of hours.
In order to provide the investors with a safeguard from such uncertainty, the future contract method is being employed in the crypto market. Future contracts work differently than normal trading. Here, the two parties involved are investors who agree on an exchange price for a future date. The contract obligates the parties to fulfill their agreement, one to sell at that price and the other to buy, when the contract comes due. This allows investors to hedge their cryptocurrency positions and mitigates the risks that are involved in the volatile cryptocurrency market.
Two Swiss companies, Vontobel and Leonteq, have recently announced that they will be providing their customers with the opportunity to trade Bitcoin Futures. Both companies released their products on the SIX exchange. This shows a significant step forward in the acceptance of Bitcoin in the financial market.
Vontobel
According to a report by Reuters, Vontobel will be releasing two mini future products that will allow investors to bet on the price of Bitcoin. These mini future products will be valued at almost a fraction of the standard future products. Vontobel released these products in mid-November through the SIX Exchange.
While discussing the release of the new product, Eric Blattmann stated that the release of the mini futures is aimed at providing investors with a safer form of investment in the cryptocurrency market and to increase their options. He stated:
"We have seen big demand for our long tracker certificate from investors interested in playing the upside potential of Bitcoin and now they have also the possibility to hedge their position or go short."
Leonteq
Leonteq launched similar products as Vontobel. The difference is that Leonteq’s product has a maturity period of two months, whereas Vontobel’s maturity period is longer. Manuel Durr, while discussing the release of the new product, explained that the mini futures provide investors with a safer and longer investment in Bitcoin. He stated:
“Clients do very much appreciate the possibility of choosing between a long or a short investment in Bitcoin.”