Bitcoin futures Sunday made their long awaited debut on the Cboe Futures Exchange. It's expected futures on the volatile digital currency will launch on CME on Dec. 18 with Nasdaq following suit sometime in 2018.

All the hoopla surrounding the U.S. debut of bitcoin futures has renewed fanfare regarding when exchange-traded products, including exchange-traded fund based on the cryptocurrency will debut. In the U.S., fund investors currently lack a viable bitcoin avenue aside from the Bitcoin Investment Trust (OTC: GBTC). That $1.69 billion product represents 0.09 bitcoin per share.

No one knows for sure when an ETF based on any digital currency will come to market, but some market observers believe a bitcoin ETF could come to life over the next six months.

Filings Galore

Anticipating that futures could pave the way for bitcoin ETF, several issuers have already filed plans for such funds.

“A futures-based ETF structure, analysts say, has a better chance to win regulatory approval than previous structures designed to own bitcoin directly,” the Wall Street Journal reports. “The Securities and Exchange Commission denied applications for such ETFs earlier this year over concerns whether bitcoin trading is sufficiently regulated.”

After previously pulling plans for a bitcoin ETF because the futures market was non-existent at the time of the original filing, VanEck recently updated that filing. First Trust, one of the largest purveyors of smart beta ETFs, and RexShares are also among the issuers that recently updated similar filings with U.S. regulators.

The SEC has historically approved commodities ETFs where the commodity in question has an established futures market, providing a template of sorts for issuers looking to bring bitcoin ETFs to market.

A Derivative On A Derivative

ETFs are, by definition, derivatives. So are futures. Put that together and what investors will have, should biticoin ETFs come to life, are products that are derivatives based on derivatives.

"A bitcoin ETF based on bitcoin futures would be a derivative on a derivative of a cryptocurrency that is unregulated. Just think about that for a second," Themis Trading's Joe Saluzzi said in a tweet Wednesday. (Saluzzi will be among a panel of crpyto experts on PreMarket Prep's Bitcoin Special Dec. 19).

Additionally, some existing futures-based ETFs have been problematic for long-term investors, such as the United States Oil Fund (NYSE: USO). By emphasizing front-month futures, USO is continually rolling contracts, exposing investors to higher costs and the potential for contango.

Contango is the scenario where a futures price on an asset is above the expected future spot price. Digital currencies are not immune to contango as highlighted by the steep curve in bitcoin futures.

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