But what about Individual Investors and Day Traders?

Again, those bitcoin ETFs will be betting on the price movement of bitcoin futures, not bitcoin itself. Before you run out and spend grandma’s life savings on bitcoin futures, note that the CFTC warns investors that they “should be aware of the potentially high level of volatility and risk in trading these contracts.” This is bitcoin, after all. They will be a derivative of a derivative – exactly what Wall Street likes (please see the 2008 market bubble and crash).

Plus, some big banks have sworn off anything with the word bitcoin attached to it, wary of the instability of the peer-to-peer digital currency. The problem is that the cost of entry into the futures market is a lot higher than with the stock market, both in financial knowledge and cold, hard cash. But what about individual investors and day traders? Presumably the same advantages of bitcoin futures – regulated exchanges and hedging bets – apply to the small guy, too. Both JPMorgan and Merrill Lynch have banned their brokers from trading bitcoin futures. So why aren’t people buying up bitcoin contracts in droves?

Second, bitcoin futures give bitcoin owners a way of hedging their bets on the volatile cryptocurrency, which can swerve 30 percent up or down in a single day. Two weeks after opening, trading volume on the CME lists only 1,001 open contracts at the time of writing, while the CBOE Global Markets Exchange, which opened a week earlier, shows 2,177 open futures contracts. With futures, you can “short” the underlying commodity, meaning that you’ll make money if the price of bitcoin goes down over a week or month or more, depending on the length of the contract. That provides an insurance policy for people holding lots of bitcoin, like bitcoin miners. Brian Whelan, director of ETF and futures trading at Baycrest Partners in New York.

Each CME contract is for five bitcoin, worth approximately $75,000 to $80,000. Compare that to the trading volume of Bitcoin itself, which has spiked to more than $10 billion a day on occasion. If you step back, though, it makes sense that the Bitcoin futures market would start slow. Whelan says that bitcoin mining operations, which are the most obvious audience for bitcoin futures, are still “getting their ducks in a row” in terms of finding brokers and clearinghouses willing to trade this new asset in larger volumes. Institutional investors like banks and hedge funds need more time to set up internal processes and permissions for trading in a new commodity. For one thing, it all happened so quickly, with trading opening just weeks after the CFTC announcement.

With bitcoin prices surging more than 16-fold over the past year, and many more investors scrambling to get in on the action, many market watchers expected that the debut of bitcoin futures would generate the same heat. For starters, they allow investors to buy and sell on a regulated, secure exchange with transparent prices and strong track records. That certainly isn’t the case with buying and selling bitcoin directly via unregulated online exchanges, some of which have been hacked or gone under overnight. That’s because bitcoin futures are attractive investments. Poof, there goes your bitcoin.