Investors who want to bet against bitcoin's massive price gains can likely do so beginning in mid-December, according to the head of the world's largest futures exchange.

"When can you be able to short this product, I think sometime in the second week in December you'll see our contract out for listing," Terry Duffy, chairman and CEO of CME, said Monday on CNBC's "Power Lunch."

CME announced on Oct. 31 it would launch bitcoin futures by the end of the year, pending regulatory review. The futures contract will be cash-settled according to the daily settlement price of the CME CF Bitcoin Reference Rate (BRR), which tracks a few major bitcoin exchanges.

Futures allow traders to bet on the price of an asset at a point in the near future. If a trader sells a futures contract in anticipation of a decline in bitcoin, the trader locks in a gain if bitcoin subsequently drops. Trading to profit off a price drop is known as shorting.

Bitcoin three-month performance



Source: CoinMarketCap

Bitcoin had a wild weekend, plunging more than $1,000 from Saturday's high of $6,827.72 to Sunday's low of $5,507.29, according to CoinDesk. The digital currency then nearly recovered all those losses to hit a high of $6,770.37 Monday, before trading near $6,360.

"I'm not trying to rein in the volatility of bitcoin," Duffy said. "But what I want to do is give it a place for other people to lay out that risk. Today you cannot short bitcoin. So there's only one way it can go. You either buy it or sell it to somebody else. So you create a two-sided market, I think it's always much more efficient."

CME's website lists special price fluctuation limits of 7 percent and 13 percent above and below the bitcoin futures' prior settlement price, and a price limit of 20 percent above or below that level.

Duffy said Monday the CME's system of "velocity logic functionality" might halt the bitcoin market for an hour if the digital currency is too volatile. "I think that's going to add a lot more structure to the marketplace," he said.

Digital currency enthusiasts see the launch of bitcoin futures as another step towards establishing bitcoin as a legitimate investment asset. Institutional investors who may be prohibited from directly purchasing bitcoin will be able to use the futures as a way to buy into the digital currency trend. Bitcoin futures could also pave the way for a bitcoin exchange-traded fund.

Several long-time investors in traditional stocks and bonds are already moving into digital asset investing, illustrating how far bitcoin has come in less than a decade. The digital currency was once only the focus of a small group of cryptocurrency enthusiasts and the online marketplace for illegal goods.

Now, an entire industry has also emerged with multiple businesses creating bitcoin through a "mining" process, selling digital mining equipment and offering bitcoin trading services. More than 120 "crypto-funds" have also launched, according to financial research firm Autonomous Next. What was once a fringe item has become a globally-traded digital asset.