A quick getting-started guide to Bitcoin, blockchain and cryptocurrencies.
“Cryptocurrencies” like Bitcoin went mainstream in 2017 after nearly a decade of meteoric growth. While technically not a currency because it isn’t backed by a government, advocates view Bitcoin as an asset class because it has two basic attributes of money.
First, Bitcoin is scarce because the laws of mathematics dictate only 21 million of them can exist. That’s good news for people worried about inflation or central banks printing money.
Second, Bitcoin can be used as a medium of exchange because it’s interchangeable and divisible. (Fractional amounts, known as a “Satoshi”, represent 0.00000001 Bitcoin.) Transactions are recorded in the “blockchain” – a massive data file available for public inspection. Some enthusiasts say it’s even safer than traditional money because no one can freeze accounts or control the market.
“Mining” – confirming a block of transactions and adding them to the public record – is a key concept for Bitcoin. This process requires a lot of math and computing power, which in turn controls the introduction of new coins. Current estimates predict it will take more than a century for the supply to be exhausted.
Since Bitcoin’s launch in early 2009, other cryptocurrencies have emerged. Some, like Ethereum and Litecoin, started with their own unique blockchains. But others, like Bitcoin cash and Bitcoin gold, were “forked” off from the original. For now, traditional Bitcoin is the only cryptocurrency with futures on traditional financial exchanges.
DISCLOSURES: Futures’ trading is not suitable for all investors and involves the risk of loss. The risk of loss in futures can be substantial. You should, therefore, carefully consider whether such trading is suitable for your financial condition. No statement within this webpage should be construed as a recommendation to buy or sell a futures contract or as investment advice.
BITCOIN DIGITAL ASSET DISCLOSURE: The Cboe Futures Exchange LLC (CFE) and the CME Group, Inc. (CME) have launched, or will soon launch, trading in Bitcoin futures. The CFE futures contracts are cash-settled contracts based on the Gemini’s auction price for Bitcoin, denominated in U.S. dollars. The CME’s futures contracts are, or will be, cash-settled contracts based on the CME CF Bitcoin Reference Rate (BRR) and the CME CF Bitcoin Real Time Index (BRTI). The specifications for each Bitcoin futures contract, including margin requirements and price fluctuation limits, can be found on the CFE and CME websites. TradeStation reserves the right to impose more restrictive limits which may, at TradeStation’s discretion, be revised from time to time. TradeStation also has the contractual right to liquidate all or any part of your position(s) through any means available, without prior notice to you. The regular risks associated with trading commodity futures contracts also apply to the trading of Bitcoin futures. These risks can be viewed at the following link: www.tradestation.com/important-information/.
Customers choosing to trade Bitcoin futures should consider additional significant risks including, but not limited to: (a) Bitcoin futures contracts have not previously traded on a U.S. regulated futures exchange and as such, there is no futures trading history in this product; (b)The price of the underlying Bitcoin and the indexes upon which the futures contracts are based are highly volatile and unpredictable based on many factors; (c) Since a limited number of futures commissions merchants may offer trading in the Bitcoin futures contracts, there might be limited volume which might impact market efficiencies and price movements; and (d) The risk of loss can be substantial and could result in a customer losing more than the initial or maintenance margin requirement. As such, each customer should conduct his or her own due diligence prior to make a decision to trade in these products. See link below from the National Futures Association for more information. www.nfa.futures.org/investors/investor-advisory.html
Additionally, the Commodity Futures Trading Commission (“CFTC”) has made available a Virtual Currency Resource Web Page designed to educate and inform the public about this topic and its risks. See the link below for further information from the CFTC. http://www.cftc.gov/bitcoin/index.html