What the Bitcoin Reference Rate Is, and Why It Matters

Bitcoin has seen amazing performance over the past year, and the cryptocurrency has found its way into the collective consciousness in ways that many would have considered to be impossible just months ago. The advent of bitcoin futures has opened up the market to a wide range of new investors, including major financial institutions, that sought a way to take positions in bitcoin without dealing with the specific challenges and risks of actually owning the cryptocurrency outright.

One key to the smooth functioning of bitcoin futures is the establishment of reliable pricing metrics. With different exchanges having different prices, it's critical to have a benchmark against which futures markets can weigh their performance. Although the first-moving Cboe Global Markets (NASDAQ: CBOE) bitcoin futures contract uses an auction rate to set settlement prices for its investors, the newer CME Group (NASDAQ: CME) bitcoin futures use what's called the bitcoin reference rate to determine pricing. Here's what you need to know about the bitcoin reference rate, and what it could mean not just to bitcoin futures traders but also for those who follow bitcoin more broadly.

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Source: Fool.com