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Bitcoin is in a Catch-22-style bind. As long as the price remains volatile it will remain dangerous for merchants to accept the cryptocurrency, barring adoption on a massive scale. Derivatives might be a useful risk management tool to hedge against volatility. But regulatory ambivalence leaves entrepreneurs timid or unwilling to invest in the infrastructure for these transactions.
While derivatives have the ring of abstruse tools, they could make or break the bitcoin ecosystem. Despite this uncertainty, the bitcoin derivatives markets are drawing attention. Seed-stage incubator Seedcoin allotted 500 bitcoins to BTC.sx, a derivatives trading platform, in early July. Last year, SecondMarket awarded a leveraged FOREX trading platform, Coinsetter, $500 million in venture capital.
While derivatives have the ring of abstruse tools, they could make or break the bitcoin ecosystem. Despite this uncertainty, the bitcoin derivatives markets are drawing attention. Seed-stage incubator Seedcoin allotted 500 bitcoins to BTC.sx, a derivatives trading platform, in early July. Last year, SecondMarket awarded a leveraged FOREX trading platform, Coinsetter, $500 million in venture capital.