Bitcoin futures investors to suffer losses

Investors who ploughed money into bitcoin futures are currently facing hefty losses, as the first contracts are set to expire in just over a week.

Soon after bitcoin futures debuted on the Chicago Board Options Exchange (CBOE) in December, frantic trading caused the price of the January contract to rise from around $15,000 to almost $20,000.

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But as the first monthly future is due to expire on 17 January, the contracts’ value has plummeted. Hitting a low of under $15,000 last week, as bitcoin itself took a dive, they managed to regain some of the lost ground on Friday to reach $16,770 on CBOE.

Designed to allow investors exposure to bitcoin through a recognised financial instrument, without actually having to own the cryptocurrency, the introduction of bitcoin futures has been a controversial move.

The US Securities and Exchange Commission and investor protection group the North American Securities Administrators Association have both warned that bitcoin could present a high risk of fraud. In the UK Andrew Bailey, head of the Financial Conduct Authority (FCA), said bitcoin investors should be prepared to lose all their money.

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Yet some investment managers achieved stand-out performance by gaining exposure to bitcoin in other ways last year.

New York-based Ark Investments managed to top the ranking of exchange-traded funds (ETFs) in 2017 with two of its investment vehicles, according to Bloomberg data. Both the Innovation and the Web X.O ETFs held stakes in the Grayscale Bitcoin Investment Trust (BIT) – as of Friday, BIT was the largest holding in each fund’s portfolio.

Rather than buying bitcoin directly, investors can purchase shares in BIT – which is listed on the OTCQX – and gain exposure to the cryptocurrency that way, since the trust owns bitcoin as its primary asset.