Can Bitcoin be Tamed?

That’s what the CME seems to think. The venerable exchange is about to start trading listed BTC futures, which will allow for both long and short investors to express a view. Here’s what CME’s Chairman Emeritus Leo Melamed is saying (via Reuters):

Melamed said he expects major investors to take part in bitcoin futures, which the exchange plans to start by the end of year.

“That’s a very important step for bitcoin’s history… We will regulate, make bitcoin not wild, nor wilder. We’ll tame it into a regular type instrument of trade with rules,” Melamed told Reuters in an interview.

The futures will allow investors to short-sell bitcoins, making two-way bets possible, a development that he expects will attract major institutional investors, not just speculators.

That’s interesting, I thought part of the allure of trading Bitcoin futures was the volatility. Guess not?

As I pointed out in my piece An Evening In Wonderland and before that in You can practically smell it in the air, it’s only a matter of if, not when, the big money comes into this “asset class.” Especially if we make it through the end of the year without a major catastrophe.

Oh, and this bears pointing out – you probably missed this but I didn’t…

Bloomberg did a story yesterday about the new effort at the SEC to streamline the ETF approval process. They want to make it easier and more transparent for new entrants and existing fund families to launch products. And guess who they picked to run it:

To lead the effort, Clayton hired ETF specialist Dalia Blass to run the investment management unit. Blass, who worked on the earlier proposal as an SEC staff member. rejoined the agency in September after a stint at law firm Ropes & Gray. The firm advised Tyler and Cameron Winklevoss on their failed bid to win approval for a bitcoin ETF.

Blass has told some industry executives that the SEC is moving quickly on an ETF rule, according to one of the people. She also noted that Clayton prioritized ETF regulation in an outline of his regulatory agenda submitted last month to the Trump administration, the person said. The document hasn’t yet been made public.

So, to recap, it’s about to get easier to bring new ideas into the ETF marketplace and get them registered and trading. And the woman in charge was an advocate for the Bitcoin ETF that didn’t get through the first time. You think it’s not going to happen now? I would say it’s just become a fait accompli with this development. A Bitcoin ETF would open the floodgates to the trillions of dollars currently held in brokerage accounts around the country (around the world).

I’m not saying everyone will want to start trading it, but if only a fraction of a fraction of a fraction start buying, selling and allocating, it’s a whole new ballgame. There’s less than $150 billion currently in the cryptocurrency. Recall the advent of GLD and how it transformed the gold market forever as a reference point. An established futures market along with a more retail friendly ETF will supercharge interest in this space.

So, I’m not sure that the thing gets tamed so much as turned into yet another mainstream trading vehicle that people of all levels of experience and sophistication will use to act like children.

My guess is that the initial impact will be bullish, but like everyone else I’m just making this up as I go along.