LedgerX has begun offering the world’s first physically-settled bitcoin futures contract. Previous offerings of Bitcoin futures contracts have been cash=settled, meaning that the trader receives cash, instead of physical Bitcoin, on contract expiry. The New York-based startup has beaten a number of other startups, such as Bakkt and ErisX, which have similar plans. LedgerX received CFTC approval for its product last month.
The contracts are open to retail investors on the company’s Omni platform while institutional clients can trade futures using LedgerX’s other products. A minimum investment amount of $10,000 or 1BTC (currently trading at $10,062.50) is required to open an account on Omni.
A Focus on Bitcoin Contracts and Retail Customers
In a conversation with Coindesk, Paul Chou – CEO of LedgerX, underscored the importance of retail clients to the company. “Cryptocurrencies are for everybody and we never started this looking to offer just to hedge funds or institutional clients,” he said. But the startup may find it difficult to attract retail clients.
According to John Todaro, director of research at TradeBlock, told Coindesk that physical-settled futures are more expensive as compared to cash-settled contracts and generally aimed at institutional investors.
Futures contracts on LedgerX’s platform can also be purchased using Bitcoin. “Cash-settled is cash-in and cash-out, we are Bitcoin-in and Bitcoin-out,” said Chou and added that this was the first time that any company was offering to use Bitcoin as collateral contract. A benefit of purchasing contracts through Bitcoin is that it removes dependency on the banking system. Because Bitcoin transfers can occur 24X7, the futures contract purchases can also occur anytime.