Nasdaq plans to establish a Bitcoin futures product in the second or third quarter of 2018, along with the Chicago-based exchanges, CME and CBOE. Nasdaq's contract would be "based on 50 indexes," whereas CME's product would be based "off of four indexes." CBOE seeks to offer a "truly regulated and well-surveilled [Bitcoin] marketplace with transparent rules and cutting-edge technology." These exchanges would enable investors to bet on Bitcoin's future prices. They would also provide a check to Bitcoin's extreme volatility by giving the cryptocurrency a much-needed foothold in mainstream establishments. In the past, Nasdaq has been less bullish on cryptocurrency than other firms on Wall Street, with CEO Adena Friedman previously describing initial coin offerings as a "bleeding edge" that Nasdaq did not plan to become involved in. Although Nasdaq has changed its tune, firms like JP Morgan Chase (JPM  ) and Citigroup (C  ) still refuse to immediately clear Bitcoin trades for clients.

© Mehaniq / bigstockphoto.com

The fact that Bitcoin constitutes a new asset class testifies to the fact that technical analysis is not very useful for predicting its behavior. The rampant speculation and explosive momentum that have driven and accompanied Bitcoin's rise has rendered it a unique phenomenon, the outcome of which is difficult to chart and predict in advance. While Bitcoin futures will indeed offer more market structure, liquidity, risk management, price discovery and stability, it will still retain its status as a uniquely volatile product. Futures will be ideal for large hedgers and larger-scale, professional trading houses, as both of these are capable of withstanding the swings. However, smaller scale investors or traders may not be able to withstand swings in Bitcoin futures.

Bitcoin's rapid ascent over the past year - perhaps most notably in its rise of 40% in the past week alone - has created a heavy purchasing frenzy amongst its speculators worldwide, which has in turn helped the currency transition towards the mainstream. But its volatility, such as rising or falling by 10% or more on an average day, might translate into panic through traditional stock markets.

© Mehaniq / bigstockphoto.com

The benefits of trading Bitcoin futures remain double-sided. Some investors think the semblance of legitimacy that trading on an American financial market affords Bitcoin may merely be illusory, creating a false sense of protection. Goldman Sachs (GS  ) and JP Morgan Chase representatives believe that the Bitcoin investment process is moving too fast, and the lack of transparency and regulation are dangerous. There is also always the possibility that, once the virtual currency encounters the regulatory rigors of a traditional trading market, the power of the Bitcoin craze will fade away.

Nonetheless, Bitcoin's sharply inclining value has generated ever more demand, with South Koreans putting their life savings into Bitcoin and Venezuela planning to create its own virtual currency, the Petro, to get around U.S. sanctions.