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Just a few hours ago, CME, the world’s largest futures exchange, opened up their own bitcoin futures market, using the ticker symbol “BTC.” The move comes a week after the CBOE launched the first-ever bitcoin futures market.

The two exchanges compete against each other for investor dollars, and already, we’re witnessing a dramatic difference in bitcoin prices. When the CBOE launched, the exchange supposedly sparked a rally to just under $20,000. But in the maiden run for the CME, bitcoin prices are suffering a strong correction, with the digital token desperately clinging to the $18,000 level.

While the sudden volatility in the cryptocurrency markets may be viewed as a “success” for bitcoin futures — remember that the primary incentive for creating this vehicle was to short bitcoin — in reality, these exchanges are irrelevant. The only way to substantively affect bitcoin prices is to impact the supply/demand picture. That, of course, is not happening.

Unlike gold futures, bitcoin futures are 100% cash settled: there’s no bitcoin changing hands at all! Consider the CME Group’s own mission purpose behind their gold futures exchange. “Gold futures are hedging tools for commercial producers and users of gold. They also provide global gold price discovery and opportunities for portfolio diversification.”

In the months and weeks leading up to the original bitcoin futures market, critical analysts explained that such exchanges are necessarily bearish because they act as natural hedges. You can see from the explanation behind gold futures that this point is correct. However, for the hedging mechanism to be effective, the traded commodity has to be physically delivered.

Look again at the CME Group’s website for gold futures. It states as clear as daylight that their gold futures market involves physical delivery of the target asset. This point is particularly critical as producers and retailers of gold need to lock-in their prices in order to create accurate budgets for their businesses.

In contrast, no such incentives exist for bitcoin futures. Yes, people mine and “produce” bitcoin, but not in the traditional sense. And while it’s extremely valuable as a fiat-currency alternative, their commoditized value is similar to the paper that a dollar is printed on.

Bitcoin prices are largely based on an idea. That makes it an ideal platform for a new, globally accepted currency. But as a commodity impacted by a futures market, cryptocurrencies are not appropriate vehicles. Cash-settled futures trading has as much chance of impacting bitcoin prices as betting deeply on one team in the Super Bowl: it’s interesting, but it doesn’t affect the game itself.

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