Currencies

Holding Bitcoins? You Can Now Hedge Against the Next Crash


The value of Bitcoin swings wildly, but for the enterprising speculator there’s never been a way to profit from declines. A financial startup is trying to change that by creating an exchange where people can bet on the future direction of the currency’s value, up or down.

New Jersey-based Tera Group said Monday it has already facilitated a trade between a company nervously holding Bitcoins and one willing to take the risk of the currency’s value changing over the next 25 days. Leonard Nuara, Tera’s co-founder, wouldn’t identify the parties. Assuming that Bitcoin sticks around, this is a service many companies may consider. Merchants interested in taking Bitcoin payments have expressed concern about holding an asset prone to sudden fluctuations in price.

The first transaction was just a one-time deal, but Tera is also building an exchange to allow for standardized versions of such transactions to take place. Tera is waiting for permission from the Commodity Futures Trading Commission to open the exchange for business, but says it is already fielding calls from companies that would like to participate.

Nuara says he’s also been hearing from potential traders who would like to get in on the action. Some are Bitcoin optimists who don’t mind taking the risks, while others think the value of Bitcoin at the end of all this is zero.

“There is usually some person who thinks it’s going up, and some person who thinks it’s going down,” he says.

Brustein is a writer for Businessweek.com in New York.

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