Bitcoin prices have surged this year: a single bitcoin stood at less than $1,000 in January and hit a record $19,783 on Sunday, according to Coindesk.
Last week, we reported Chicago’s CBOE exchange began Bitcoin futures trading - bets on a future price – but CME is far bigger.
CBOE Bitcoin futures surged nearly 20% on their debut last Monday, and more than 4,000 contracts changed hands by the end of the day.
But as interest in the digital currency increases, so do the warnings.
On Sunday, the chairman of UBS bank and former Bundesbank head Axel Weber joined the chorus of Bitcoin warnings.
“Bitcoin is not money,” he said in an interview, and urged regulators to intervene.
Analysts believe CME’s entry into the Bitcoin market will generate more interest in the crypto-currency, possibly pushing the price higher.
The CBOE futures contract is based on a closing price of Bitcoin from the Gemini exchange, which is owned and operated by virtual currency entrepreneurs and brothers Cameron and Tyler Winklevoss.
However, the CME contract price will be culled from multiple exchanges, potentially offering investors more transparency about the value.
“The CME [futures] contract is based on a broader array of exchanges,” said Matt Osborne, chief investment officer of Altegris, which has $2.5bn in alternative investments.
“Volumes are going to slowly increase as professional traders get comfortable with the price action and more importantly get comfortable with the volatility.”
Institutional investors are prohibited from buying Bitcoin directly because the market is unregulated, but they can buy futures contracts.
Mr Weber told the Swiss Sunday newspaper that investors should resist jumping on the Bitcoin bandwagon, saying the bubble would inevitably burst.
He said Bitcoin does not fulfil the three main functions of money because, in his view: it is not an effective means of payment; it is not a good measure of value (since prices are not written in Bitcoin); and it is not an effective way to store value, since it is inherently unstable.