A new "game of skill" centered around bitcoin's price changes is going live.
Launched by Chicago-based Level Trading Field, Bitcoin Market Predictor now allows users to place bets on the future price movements of bitcoin, adding to a growing list of mechanisms U.S. investors can use to speculate on bitcoin's price – whether it's going up or down.
While most of the mechanisms to short bitcoin, at least in the US, are aimed at institutional investors, Bitcoin Market Predictor is notably targeted towards retail investors. Each game costs only $50 to play.
In an exclusive interview, Lanre Sarumi, CEO of Level Trading Field, whose corporate clients include users at Bank of America, Deutsche Bank, and Barclays, explained why he believes the game is so important to U.S. retail investors.
Sarumi told CoinDesk:
And there's truth to Sarumi's statements. While several global exchange's allow users to short bitcoin, only Coinbase's GDAX exchange offers such functionality to US residents, though the shorting feature is currently disabled, pending GDAX's review of unusual price movements in ethereum in June.
So, how does it work? The game is structured so that groups of 10 are segmented into a game, with users placing bets about the price of bitcoin at the top of the hour. The top three most accurate predictions share the pot, which for each game (after Level Trading Field's 10 percent fee) leaves $450 to split.
The closest guess gets 50 percent of the pot ($225), the runner-up gets 30 percent ($135), and the second runner-up receives 20 percent ($90).
While gambling on games and chance is prohibited under Illinois law, Samuri said his company's prediction game, which is similar in some ways to fantasy sports betting, is permitted because it is a game of skill.
Level Trading Field uses price data provided by the Chicago Mercantile Exchange (CME) as the reference data for the game. CME data combines four different bitcoin exchanges - Bitstamp, Coinbase's GDAX, itBit and Kraken - in order to normalize price data.
In order to further minimize the effects of price volatility, Level Trading Field applies additional logic to the final price used to benchmark the winning bid. The company will store all of the tick data for the final minute of each game, and then averages it to determine the winning bid.
Bitcoin over chart image via Shutterstock
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