Investors will soon be able to trade options and hedge risk on the major cryptocurrencies, following a ruling by the US Commodity Futures Trading Commission (CFTC).
According to a report by Bloomberg, the ruling is scheduled to come into effect between late September and early October.
The ruling gives approval for LedgerX, LLC to become the first regulated exchange and clearing house for the trading of options and digital currencies.
LedgerX is a trading platform for cryptocurrencies. In granting approval for the exchange, the CFTC said that “LedgerX will be authorized to provide clearing services for fully-collateralised digital currency swaps”.
Bloomberg reported that LedgerX is planning to issue options contracts for bitcoin-to-dollars. The length of the contracts will span between one and six months.
Once the platform is established, currency swaps for Ethereum are expected to be added, as well as longer-term contracts.
LedgerX chief executive Paul Chou told Bloomberg that “this will pave the way for others globally to look at the space and the appropriate way to regulate a new market like this”.
LedgerX is a subsidiary of Alphabet’s (the parent company of Google) venture capital division.
The company hopes that having a regulated exchange will encourage institutional investors to participate in the market for digital currencies.
Given the explosion in popularity and interest in cryptocurrencies, the platform will allow large investors to gain exposure to a new asset class while having a vehicle to hedge risk.
Bitcoin traded overnight around $US2,500 and a short time ago had moved slightly higher at $US2,530. Ethereum also had a low-volatility session in overnight trade and is holding above $US200 this morning.
The Bitcoin development community is currently holding a trial run for the new SegWit2 platform, which will allow higher transaction volumes on Bitcoin trades. It’s expected to be officially rolled out on August 1.
While analysts from Goldman Sachs predict that Bitcoin can move back above $US3,000, billionaire investor Howard Marks said overnight that cryptocurrenices “aren’t real” and that the market for digital currencies is still running mainly on optimism.