Luxor Technology Corporation (Luxor) and Bitnomial, Inc. have announced the launch of the first US exchange-traded Hashrate Futures, according to a press release sent to Bitcoin Magazine. Set to debut on Bitnomial’s derivatives exchange by the end of this month, these futures contracts are specifically tailored to cater to Bitcoin miners and institutional investors alike.

“Hashrate has one of the highest volatilities of major commodities, and the April 2024 Bitcoin Halving will exacerbate this volatility,” said Luxor’s Head of Derivatives, Matt Williams. “Bitcoin miners need additional methods to mitigate this price risk to ensure the longevity of their businesses. Exchange-traded hashrate futures will allow them to quickly move in and out of hedging positions to de-risk their revenue streams, and the revenue certainty should improve their credit profile with lenders, which will lower their cost of securing capital.”

With the impending 2024 Bitcoin Halving in mind, the Hashrate Futures aim to provide miners with a tool to hedge their future revenue streams while offering investors access to a tradable derivative tracking Bitcoin mining hashrate. The contracts, denominated in 1 petahash (PH) units and with monthly durations, will reference Luxor’s Bitcoin Hashprice Index for settlement, effectively tracking the value of the underlying commodity, i.e., hashrate.

Accessible to those with Futures Commission Merchant (FCM) accounts connected to the Bitnomial exchange, the Hashrate Futures is the latest addition to Luxor’s suite of hashrate financial products. 

“As we approach the Bitcoin halving and witness the unprecedented demand for spot Bitcoin ETFs surpassing the available mined supply, Bitnomial stands as a pivotal bridge in the crypto ecosystem.” stated Bitnomial Founder and CEO, Luke Hoersten. “Our listed hashrate and physically delivered bitcoin futures and options empower miners to navigate this evolving landscape seamlessly. Through Bitnomial, miners can efficiently trade hashrate-bitcoin futures spreads, gaining invaluable bitcoin-denominated hashrate exposure while effectively hedging and delivering mined bitcoin directly to consumers via a federally regulated exchange. This convergence of innovation and regulation solidifies Bitnomial’s commitment to fostering a robust and accessible marketplace for all participants in the crypto space.”

As part of Bitnomial’s Bitcoin Product Complex, these physically backed contracts intend to provide a unique opportunity for market participants, with growing interest evidenced by record-high volumes and open interest during Q4 of 2023.

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The Chicago Board Options Exchange (CBOE), the largest US options exchange, has announced a move to open a new model of Bitcoin futures trading in 2024: A cryptocurrency-native exchange and clearinghouse that offers margin trading and leveraged derivatives among many planned products.

CBOE Digital announced these plans on November 13, sending ripples through the entire Bitcoin community with a radical list of planned features and trading options. The exchange is offering a wide array of products and services, so that users are not only able to directly invest in these futures contracts, but also to engage in multiple higher-risk methods of increasing their purchasing power. Margin trading involves using the assets in an account as collateral for a much larger loan from the exchange, to be invested in these futures trades, while leveraged trading allows a user to receive essentially a line of credit to magnify their position, taking gains and losses at several times the amount of their initial investment. CBOE plans to offer both of these functions.

These are only a few of the options outlined in their initial press release, as the exchange claimed to present “an intermediary-inclusive model” that “ensures separation of duties to avoid conflicts of interest,” and that CBOE’s capacity to serve as both exchange and clearinghouse “will allow it to potentially bring more unique and groundbreaking offerings in 2024.” The announcement also adds that their roadmap includes several physically delivered products, pending regulatory approval. By acting in this manner, ordinary investors will have a lower physical barrier to entry if they wish to gain exposure to Bitcoin, with the caveat that these margin and leverage options also come with an added risk.

Although CBOE’s plan to add these high-reward options to the world of Bitcoin futures trading is certainly a new experiment, the exchange’s history with this type of trading goes back quite far into Bitcoin’s history. CBOE was in fact the first options exchange in the world to offer Bitcoin futures trading back in December 2017 when it beat their Chicago-based rival CME to this milestone by 8 days. Although this particular period in crypto was heady with excitement, showing an unprecedented spike in Bitcoin’s price that wouldn’t be matched for several years, this rally wouldn’t last. Ed Tilly, then-CEO, claimed that “given the unprecedented interest in bitcoin, it’s vital we provide clients the trading tools to help them express their views and hedge their exposure,” but nevertheless this initial project was shuttered in 2019 during the bear market.

Still, although CBOE’s worldwide-first in Bitcoin futures trading couldn’t stay the distance, this actual type of Bitcoin exposure has proven very popular with the test of time. The Chicago Mercantile Exchange (CME) for example, which launched the second-ever futures trading program, has seen years of lagging interest turn into dramatic success. The CME has recently been enjoying a higher rate of Bitcoin futures trading than Binance, the world’s largest cryptocurrency exchange, in a development that commentators have called “a proxy for institutional activity.” It’s easy to see why there’s so much buzz around the subject: The impending Bitcoin ETF is frequently credited for Bitcoin’s success in late 2023, and the main point of interest is that a financial instrument like this would be an easy stepping-stone for a layperson to become financially entangled with the world’s premier digital asset. But, if rates of futures trading conducted in cash versus crypto are anything to go by, Bitcoin futures trading has also been doing this.

So, although CBOE ended their groundbreaking effort to pioneer Bitcoin futures trading, they’ve seen the action growing over the years, and have decided to dust off the project with some new and expanded functionality. They gained regulatory approval from the Commodities and Futures Trading Commission (CFTC) in June to carry out these revolutionary product offerings, and they’ve been off to the races ever since. CBOE Digital’s President John Palmer claimed at the time that margin trading is a “big driver” of derivatives trading worldwide, and added that “we’re always taking a very prudent approach to products that we list in the spot and derivatives markets.”

To facilitate a smooth launch for these new services, CBOE has entered into partnerships with several different leaders in the intersection of digital assets and finance, including B2C2, BlockFills, CQG, Cumberland DRW, Jump Trading Group, Marex, StoneX Financial, Talos, tastytrade, Trading Technologies and Wedbush. Palmer told the press that “our upcoming launch of margin futures represents a significant milestone for CBOE Digital, and we are grateful to have the support of such a remarkable group of industry partners who share our commitment to building trusted and transparent crypto markets. We couldn’t be more excited,” he added, “to extend access to [futures] further into the digital assets markets and offer margin trading for our customers.”

The new regime of futures trading at CBOE is currently scheduled to open on January 11, 2024. Depending on its success and possible breakthroughs in regulatory approval, new features may be added in the following months. However, although CBOE has also announced that Ether futures will also be available alongside Bitcoin ones, Palmer firmly stated that there are “no plans in sight” that any altcoins will be added any time soon.

The Bitcoin community is waiting with bated breath to see how well these futures trades perform come January. Although margin and leverage trading does include the potential for increased losses and is not for the faint of heart, it doesn’t change the fact that the vastly decreased amounts of cash up front required to invest are a major draw. If the Bitcoin ETF is set to turn total novices into Bitcoiners, with things as mundane as pension funds suddenly tied up with Bitcoin, then this margin futures trading is set to have the smallest private traders to jump in headfirst.

As it stands today, the existing Bitcoin futures trading is already a substantial industry, and CBOE is betting that these riskier options will leave all sorts of traders looking for the action. Although Bitcoin’s main goal is to turn existing financial models on their head, it can’t be denied that the marriage of Bitcoin and finance has paid out massive dividends in increasing Bitcoin’s popularity and value. If CBOE can set a trend in the industry for the second time on Bitcoin futures trading, a whole world of opportunities will open up. 

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Chicago Board Options Exchange (Cboe) Digital announced today its plans to introduce trading and clearing in margin futures on Bitcoin, commencing January 11, 2024. This move positions Cboe Digital as the first U.S. regulated cryptocurrency native exchange and clearinghouse to facilitate both spot and leveraged derivatives trading on a unified platform, according to the announcement.

Initially offering financially settled margined contracts on Bitcoin, Cboe Digital plans to diversify its product suite to include physically delivered products, pending regulatory approvals. The margin model is designed to enhance capital efficiency, enabling customers to engage in futures trading without the requirement of posting the full collateral upfront.

The unified spot and derivatives trading platform provided by Cboe Digital aims to streamline customer access to both markets, unlocking opportunities for increased capital and operational efficiencies.

The upcoming launch of margin futures will be supported by other firms in the cryptocurrency and traditional financial sectors, including B2C2, BlockFills, CQG, Cumberland DRW, Jump Trading Group, Marex, StoneX Financial, Talos, tastytrade, Trading Technologies, and Wedbush.

John Palmer, President of Cboe Digital, expressed gratitude for the support from industry partners, stating, “Our upcoming launch of margin futures represents a significant milestone for Cboe Digital, and we are grateful to have the support of such a remarkable group of industry partners who share our commitment to building trusted and transparent crypto markets. Futures have long served as valuable hedging instruments in the traditional financial markets, and we couldn’t be more excited to extend access to this tool further into the digital assets markets and offer margined trading for our customers. We believe derivatives will foster additional liquidity and hedging opportunities in crypto and represent the next critical step in this market’s continued growth.”

The planned margin futures launch aligns with Cboe Digital’s existing offerings of Bitcoin, other cryptocurrencies, and stablecoin trading on its spot crypto market. Contract margin requirements for the new futures will be published daily on Cboe Digital’s website, accompanied by standardized portfolio analysis of risk (SPAN) compatible risk parameter files for replicable margin calculations.

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