Bitcoin Futures Could Open the Floodgates for Institutional Investors
bloomberg.com
bloomberg.com
I'm sure I left cash on the table, but I was too late to the game to have really made a fortune on this stuff (curse my younger self for giving up on setting up a miner after a little difficulty ("it'll never be worth anything anyway", I said to myself), back when a cpu could still mine).
Good luck to everyone still playing - I'll believe bitcoin is going somewhere when the majority of it's transaction volume isn't speculation, drug dealing or money laundering.
If you don't want to do that, maybe it isn't quite as certain as you suggest.
If the comment only suggested that the true value of Bitcoin is lower than the currently traded rate (and made no mention of what the market value would do), this particular observation would be relevant.
Even if bitcoin is certain to crash, without a deep understanding of when (and by extension, how) a naive futures trader still runs a good chance of being eaten alive, or making poor returns.
Stating bitcoin will crash is a bit like the conventional wisdom that smoking is bad for your health. One can reasonably be very confident in the truth of it without being confident in specific odds on any bad outcome.
Edit: Found it. https://rhsfinancial.com/2017/06/line-aggressive-crazy/
I hope you really think about applying the Kelly Criterion to trading bitcoin futures and hope you realize that the person completely ignores friction(transaction costs),and does not show a sharpe ratio( who cares if you beat a benchmark with 10x the risk).
"[In November 2000.] Those kinds of times… when everyone is running around like a chicken with its head cut off, that's pretty good for us… "~Jim Simons (https://en.wikipedia.org/wiki/Renaissance_Technologies)
If you're able to associate some timeframe to the idea that with p = 1 Bitcoin will be at half the value it currently is, the Kelly criterion suggests you should be quite a bit of the farm. Applying the Kelly criterion in supposed p = 1 situations (e.g. "Like it or not, [the market will crash]") is pretty invalid.
The funny thing about this is when the real smart ones get there hands on this contract (quants), watch out. Goodbye free lunch and hello very efficient pricing.(Low vol)
What I meant was, how they plan on "replicating", constructing the index value ,in which ,they( the CME) will base the value of bitcoin to be.
It is detailed here. https://www.cmegroup.com/trading/files/bitcoin-reference-rat...
CNBC stated that it is a weighted average of 4 index's in the video, but could not find anything of the sort in the article (https://www.cnbc.com/2017/10/31/cme-plans-to-launch-bitcoin-...)
http://www.cmegroup.com/media-room/press-releases/2017/10/31...
I didn’t, and I consider the profit I’ve made to be a satisfying amount of “free money”, so I’m just going to keep watching from the sidelines.
No judgement, I’m just out.
I'm certainly willing to believe anyone at those times. But... everyone's been quite wrong.
I make a weekly purchase of a small basket of cryptocurrency (mostly BTC) and I actually mine XMR with some leftover hardware since it's price efficient currently. No different than hedging your retirement portfolio with commodities and other non-correlated assets with your equities basket.
Cryptocurrency isn't going anywhere anytime soon, that's about the only thing we can say for sure.
I'm worried people will lose money seeing all these gains in crypto and taking statements like yours at face value. Just because someone out there made 50x their initial investment in crypto from times t1 to t2 doesn't mean anybody will make this much money after t2.
Cryptocurrency might not go anywhere in general, but there's no reason coin X on chain Y will be worth anything in 10 years. Miners are already pretty ruthless about switching chains to whichever makes them the most money.
Was this foreshadowing? Because this statement absolutely is:
>>The same could be said of any bubble in history. Even though tulips reached $X, they still crashed in the end.
You've neglected to include every other asset appreciation model like the DJIA, NASDAQ, Nikkei, etc, solely to focus on... tulips.
BTC may very well be a bubble, just like real estate (or is it?), but like you cannot tell if you are in a bubble while you're in it, nor can you tell if it IS a bubble either. If you are authoritatively stating that we are in a BTC bubble, your opinion is worse than mine, which is to say it is inconclusive and the person I responded to - had they had any conviction to bet against BTC at $500 or other price points where his same argument was trotted out - would have lost his entire stake, or close to it.
>>but there's no reason coin X on chain Y will be worth anything in 10 years
If you could quote from my comment where I said BTC would be worth anything in 10 years, this statement would make more sense. As it is, you just knocked down a strawman. I specifically said I am willing to believe that BTC will go to zero USD tomorrow. Because it's totally possible that it will.
It just hasn't, yet, and anyone saying that it will has the same amount of information as the people saying it will go to $50,000: None.
With Bitcoin, your "asset appreciation model" relies on people continually buying bitcoin at a larger rate to usd. There is no underlying asset (a business) that has intrinsic worth that may drive the price. You could argue that there are some analogues, for example, the mining hash rate or the strength of the blockchain, but the actual value of these is extremely hard to define. That is why Bitcoin may be in a bubble, people may be overestimating how these intangibles may be affecting price; it is hard to say what the value may truly be.
I am not authoritatively stating that we are in a BTC bubble, just that I would be very cautious with bitcoin and think a bubble is likely. Nobody knows what will happen, but we certainly can't say that Bitcoin isn't in a bubble (as you seemed to originally suggested), and in my opinion bitcoin resembles a bubble, though I respect that it may not to you.
If BTC was the stock market, then it has crashed at one of those numbers. It gradually went from $1000 down to about $200. If the stock market did that, everyone would be in a panic.
Facebook went 10x, from $50bn to $500bn, after it was added to the S&P500. A similar pattern can generally be seen for other stocks being added to the index. That's one company / stock.
There is only one Bitcoin. There is only one Ethereum. You have investors globally buying mostly those two assets. Want to buy the asset class? You buy one of those two (or both)
Pension funds manage around $300tn. If those allocate 1 or 2% to crypto, a sparkly new asset class, you'll have a $3-6tn market cap. Which they might, given the above average returns it's been generating.
Gold is worth $8.2tn globally. Bitcoin in my view qualifies as digital gold. Why was gold originally picked as a store of value? You could've picked other metals. Or diamonds, etc. But someone decided gold was the one. Gold in itself isn't very useful. It's been given its value by people, because they believe it to be a store of value. (I'm not a gold bug and I personally don't think gold is worth holding) But think about this: how high could gold and silver go in a speculative bubble? $13tn? $16tn? Higher?
There will be 20-30-40% corrections along the way, but in my view, it's going much much higher -- very much like the .com bubble (which went up to approx. $5.6tn). Wouldn't be surprised if this entire space achieves a multi trillion market cap ($2-4tn) over the next few years, with most of that ending up in Bitcoin and Ethereum.
Note: this is not investment advice. Do your own research and make up your own mind.
But at the same time I don't think the comparison to Facebook or any other listed stock is apt - they trade at a multiple of earnings, you can base the valuation on some underlying fundamental. That is not the case with bitcoin
Gold still has that value even though it’s price has been inflated and corrected many times.
Bitcoin on the other hand has no real world value outside of crime because it never evolved to a real currency. Which means that the only way to gain a net value on your investment, is for orher people to come in and buy bitcoin after you.
Which means you’ll also have to sell it before those people too.
I’m not telling you not to buy bitcoin. It’ll probably go much higher than it is now, but it will some day go to zero because it lacks any innate value.
Now, what that means for the price is nothing really. Speculation commodities (like Bitcoin and gold) go up and they go down without a whole lot of rhyme or reason. But the analogy to gold is valid.
You’re right that you need to expend bitcoin to trade it, but this is more a weakness than a strength. It gives you a banking system of sorts, in that you’re guaranteed someone will handle your transaction for money. This also means that if the value of bitcoin drops then nobody will be around to do the calculations required to do transactions, making it an inherent risk.
You can downvote it all you want, but the value of the transaction is directly tied to the value of Bitcoin. This makes it profitable on the way up, and an outright danger in the way down because it'll prohibit you from selling your bitcoin when the value crashes.
Like I said, invest all you want, there are plenty of money to be made still, but at least be aware of the risks.
Not true. Gold has its value mostly because it is rare. Jewelry can be made of silver, copper, and any number of other metals. Its "real" value exists because people believe in its "intrinsic" value, not practical value.
Maybe, maybe not. Some people are convinced bitcoin will climb another 1000x or better within a short time frame (10 years or something). I am going to hold a little bet (3 digits) on this.
If you destroyed all the bitcoins but 1 today, that single bitcoin would be worth the entire market cap.
says everyone who has ever heard of bitcoin (except the lucky few who mined and or bought coins early and still have them). A $5000 super-duper giga-hash miner barely breaks even, takes forever to ship, and and in a year becomes a paperweight.
The fundamentals that make bitcoin so scarce and difficult to mine/acquire, are what gives it value.
I couldn't agree more.
That doesn't mean that next year it should be worth double of what it is now. One would need a better index of miner capital costs and their increases to really track but my napkin says miner required value now is around ~$1200 (based on the value pump that happend just prior to the previous halving)
Why? What evidence do you have that a high hash rate causes high value?
I would argue that the hash rate follows value, rather than the other way round. A low hash rate and high value makes mining is more profitable, which results in more miners joining, raising the hash rate. Thus the hash rate adjusts to reach an equilibrium against the BTC to electricity exchange rate.
I do actually say that in the article, in almost those same words.
My (perhaps not very well articulated) point was that regardless of what follows what, the hash rate, or the amount of work, in terms of energy expended is by far greatest of all other crypto coins, especially considering the whole blockchain going back to beginning, which means to 51% attack Bitcoin is harder than anything else right now.
For this reason, if I wanted to park my money in a crypto currency, I'd probably choose Bitcoin as the safest, hardest reinforced as far as proof-of-work goes.
Of course there are other factors at play here, but it seems like amount of proof-of-work, or the difficulty, is an important factor in a crypto currency preciousness.
Most drug markets have moved on from Bitcoin to coins that offer strong privacy and because of the transparent ledger it is a poor choice for money laundering. Don't take my word for it though the UK Government issued a report recently placing the risk of people using Bitcoin for money laundering at low.
https://www.gov.uk/government/uploads/system/uploads/attachm...
Edit: There was a good article on Forbes.com about how to think about Bitcoin's value using the Network Value to Transaction Ratio.
https://www.forbes.com/sites/wwoo/2017/09/29/is-bitcoin-in-a...
(And to be clear, I do not mean volatility against other currencies, but volatility against your consumption basket, bread, butter etc.)
IMO, most fan-fiction is worse than the original, the best fan-fiction is often better.
https://commons.wikimedia.org/wiki/File:Gold_price_in_USD.pn...
People talk about Bitcoin as "digital gold", but in reality it's not even close, and no crypto ever will be. Gold is valuable because there is a fixed natural supply, and throughout human history, across many civilisations and societies, gold has always been worth something - unlike our fiat currencies who's supply can be altered and made valueless.
The problem with Bitcoin isn't it's supply, it's that it's value relies on it's demand remaining high (or at least maintaining current levels). Problem is there is no historic reason or intrinsic value to bitcoin to assume it will continue to have steady demand like gold.
More worryingly in my opinion is that bitcoin's current demand isn't really for bitcoin at all. The demand is to make USD fast. The moment people realise Bitcoin might not give them returns similar to other safe investments, it will crash like all other bubbles do.
I'm not saying people who get in early won't make loads of money, plenty of people made money from the dotcom bubble too, but you need to be smart about it and understand the risk. At $6,500 bitcoin's market cap is far beyond PayPal's which provides a genuinely useful service and processes millions of dollars of transactions every day.
> The world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry.
The transaction rate issue is 99% political in fighting and that has basically been solved or will be by mid November.
And if the simple transaction is me purchasing a pizza instead of transferring a million from one speculator to another? How much does it cost and how much it takes time?
In dirt-simple terms, the lightning network allows you to squash several transactions taking place over a long period of time into one of a much smaller size. It also allows instant payments. [1]
Another way to scale is using sidechains, which shift the transaction burden onto a complementing chain that has a two-way peg to bitcoin. [2]
Neither of these are production-ready yet, but should help improve scalability by a couple of orders of magnitude in the long run.
That being said the current price bubble is out of control and I would strongly warn you away from buying any--and for the sake of full disclosure and identifying my bias I do hold some cryptocurrency.
Here's a lazy copy/paste from the site:
> The Lightning Network is dependent upon the underlying technology of the blockchain. By using real Bitcoin/blockchain transactions and using its native smart-contract scripting language, it is possible to create a secure network of participants which are able to transact at high volume and high speed.
> Bidirectional Payment Channels. Two participants create a ledger entry on the blockchain which requires both participants to sign off on any spending of funds. Both parties create transactions which refund the ledger entry to their individual allocation, but do not broadcast them to the blockchain. They can update their individual allocations for the ledger entry by creating many transactions spending from the current ledger entry output. Only the most recent version is valid, which is enforced by blockchain-parsable smart-contract scripting. This entry can be closed out at any time by either party without any trust or custodianship by broadcasting the most recent version to the blockchain.
> Lightning Network. By creating a network of these two-party ledger entries, it is possible to find a path across the network similar to routing packets on the internet. The nodes along the path are not trusted, as the payment is enforced using a script which enforces the atomicity (either the entire payment succeeds or fails) via decrementing time-locks.
> Blockchain as Arbiter. As a result, it is possible to conduct transactions off-blockchain without limitations. Transactions can be made off-chain with confidence of on-blockchain enforceability. This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made. By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved – but with the blockchain, the result is deterministic.
I haven't explored sidechains enough to give you a competent tl;dr but the security model is discussed in the whitepaper I linked.
I do not quite see how that increases the real world capacity by orders of magnitude. I mean if we assume that people actually spend their money to quite a few different places and everyone would require a significant overhead of a single transaction to be committed for unspecified time. Further, it requires a minimum of two transactions on the blockchain fore each lightning ledger, so if I buy pizza today, and need to close that ledger to buy a sandwich tomorrow, that brings three transactions to blockchain. Of course, you can optimize this, but still, orders of magnitude sounds optimistic.
I recommend you read the summary on lightning.network.
The issue it does not solve, though, is the volatility.
I can transfer $5,000 to my brother in Ukraine for, essentially 0 using Bitcoin.
You are correct that the fees may be too high for typical consumer transactions like buying a soda from a vending machine. But for large transactions, and institutions moving money around Bitcoin provides a big advantage.
How does that compare to e.g. paypal?
The cost to transfer from wallet to wallet, is about $4.00 right now. This destroys Pay Pal where the cost which would be $145.00, if you do this wallet to wallet transfer at night it could take 30 minutes to move from person to person. This is fine for us, but obviously will never work for transactions in a store.
He can then use a site like Coinbase, to sell the Bitcoin and then withdraw the Bitcoin into his local bank/currency. This can happen in as fast as 4 days, but as much as a week. I'm not sure if that's on Coinbase or his local bank, but it actually has nothing to do with Bitcoin.
But the amount being transferred is fixed before the withdrawal starts, so it the time he is exposed to Bitcoin price fluctuations is only a few hours.
Basically it comes down to this. If you can afford to wait a week to access your funds Bitcoin is a great way to transfer large sums of money. If you need the money immediately you still need to pay a high fee to Pay Pal, or an even higher fee to Western Union to the less technically inclined.
http://mashable.com/2017/08/28/bitcoin-transaction-fees/#.7b...
Also, if you can afford to wait days, you do not compare to paypal, but to a normal international bank transfer. Haven't done that for a while, but I assume that cost is around 10-20 dollars.
Please correct me if I am wrong, but it very much looks like I need to pay minimum 1.49% to convert from USD to BTC and also your brother needs to pay minimum 1.49% before he has gotten his local currency. So this is more expensive than Paypal?
Most people who do significant transactions on Coinbase actually use the trading tool called GDAX. Which can be a little scary to look at first. It's a trading platform owned by Coinbase and transfers between the platforms are completely free.
Purchasing and selling directly through Coinbase has a similar fee to Paypal, especially if you are buying with a credit card.
Coinbase takes my money in U.S. dollars, then I transfer to GDAX, buy Bitcoin. You could actually skip Coinbase entirely and just use Gdax but the Coinbase interface is nice and its easy and I like to do it this way.
GDAX charges a .25% fee on the "taker" of a transaction. The maker/taker dynamic I am not equipped to explain, but only 1 of the parties pays that fee. If both my brother and I got hit with the taker fee on our transactions we would be losing .5% total, still much less than Paypal.
This fee could be avoided entirely by becoming the "maker" but that exposes you to some risk, because you are setting the price you think Bitcoin should be traded at, and you must wait for someone to agree to the price you are setting.
But still I fail to understand what is the case where bitcoin is a competitive option to get money from bank account to another. in addition to the possible 0.25% fee you are anyway facing the bid ask spread over two currency exchanges (usd-> btc and btc -> target currency) and if you compare those to bank transfer costs, I just don't see how looping through btc could be more economical.
I read stories here of people buying at $7 and selling at $35. Don't be that person. Buy a bit again and see where it can still go. The market cap says it still has a lot of potential.
What the SEC was after when they denied the winklevoss ETF was a way to confirming that they could audit all bitcoin transactions on the applicable exchanges, and following from that, the identities of all the exchange participants.
Here is the reference index that the CME is using
http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.ht...
and here is the methodology that they are using to calculate the bitcoin price. As far as I can see, they are accepting trade confirms from the following venues....
Bitfinex, Bitstamp, GDAX, itBit, Kraken and OKCoin.com
http://www.cmegroup.com/trading/files/bitcoin-reference-rate...
Interesting that these are cash settled vs being settled in bitcoin. I guess that speaks as to who they expect to use these instruments.
I don't think that's accurate, unless you're using a strange sense of the word "audit". The SEC's criticism seemed mainly to focus on the fact that the exchanges lacked controls to prevent price manipulation, and lacked oversight by regulators (not just the SEC) to ensure those controls were in place and effective.
The constituent exchanges are listed here [1], basically the list you posted without Bitfinex or OKCoin.com.
> Interesting that these are cash settled vs being settled in bitcoin. I guess that speaks as to who they expect to use these instruments.
This seems an odd decision to me as well, especially since Bitcoin is almost a textbook commodity. I guess they are afraid that there could be a short squeeze if the existing exchange can't handle a greatly increased volume, but trusting that the exchanges can provide sufficient liquidity is a requirement to use their pricing data as well, otherwise you can get manipulation on the other end.
[1] http://www.cmegroup.com/education/brr-brti-constituent-excha...
Either you're intentionally lying or you haven't spent enough time outside of the highly censored /r/bitcoin subreddit. Here's my evidence and it's straight from Bitcoin core's site.
https://bitcoin.org/en/alert/2017-10-09-segwit2x-safety
Check the list on the bottom. If that doesn't prove to you that the overwhelming majority of businesses and users are upgrading the network via segwit2x, you're a lost cause.
1) Keep Bitcoin in core wallet, Electrum, etc.
2) Avoid exchanges, online wallets, etc, especially those implementing the hard fork.
3) Don't do transactions just before, or just after, the fork.
And before resorting to underhanded insults (you're a lost cause) I'd do some research ;). Cheers.
Sorry about that. It's really difficult to tell the difference between a professional troll and an honest person with a genuine difference of opinion. It's been a tough few years for every Bitcoin believer.
[0] https://blog.coinbase.com/clarification-on-the-upcoming-segw...
[1] https://gemini.com/blog/upcoming-bitcoin-hard-fork-modified-...
https://www.danielstrading.com/futures-trading-education/201...
Typically they almsot always were delivered rather than cash settled. Cash settlement is more common for futures on indexes.
See here: http://www.cmegroup.com/market-data/reports/cash-settled-fut...
>It is estimated that only 2% of all futures contracts are actually delivered.
Popular Physical Delivery futures contracts include (but are not limited to) CME Currencies (Euro, JPY, & GPB), CBOT Treasuries (2 yr, 5yr, 10 yr, & 30 yr), NYMEX Energies (Crude Oil, Natural Gas, RBOB Gasoline, & Heating Oil), CME Live Cattle, CBOT Grains (Corn, Wheat, Soybeans, Soybean Meal, Soybean Oil, Rice, and Oats), COMEX Metals (Gold, Silver, & Copper), and ICE Softs (Sugar, Cotton, Cocoa, Coffee and OJ).
There are plenty of physical delivery futures still in existence.
That is interesting to say the least. There are people claiming precious metal prices are being kept artificially low using a similar way. Formally the futures have to be settled in metal but for some reason deliveries from vaults never match (i.e., they are considerably lower) the those implied by the futures standing for delivery.
Now for that to work with BTC the futures market has to get really big (in PM they say it's like 100 future oz vs 1 real oz) and they need an unlimited bankroll. At that point one can short the hell out of the futures and cash-settle if the sell avalanche doesn't affect the price as much as required.
Not saying those "conspiracy theories about PM manipulation" are true (I have no way to know) but there is evidence that looks "quite extraordinary" to my eye.
What evidence?
All the proponents I've heard advocating this theory have had zero evidence to back it up? Please provide yours.
- Look at the average daily gold price and when it's lowest
http://goldsilverworlds.com/price/gold-and-silver-price-mani...
- Look at paper ounces versus real gold in Comex storage:
http://www.zerohedge.com/news/2015-08-03/comex-edge-delivera...
- Dumping 1.5 bn$ of Gold longs (these occur regularly, often at illiquid times)
http://www.zerohedge.com/news/2016-08-24/someone-just-puked-...
Is any of this proof? No. Is it strange? I'd say so.
Futures tend to be cash settled when the underlying instrument is not liquid enough. If the futures would be settled to Bitcoins, it would limit the trading too much; for every initial buyer there needs to be a short seller, and the risk of a short squeeze would keep sellers from entering the market.
There are a few reasons for this but broadly it comes down to the fact that cash settled contracts are more attractive to a broader set of investors (which means more volume and thus more income for the exchange which sets the contract terms). For example, cash settlement is more useful to investors who wish to hedge something which is close to or correlated with, but not the same as, the underlying. Hence the popularity of Eurodollar futures. This is even the case with many commodities (how many people actually want to take or make delivery at the specified delivery point?)
Playing against this is the fact that if the underlying market is less transparent (as is the case for many commodities) then physical delivery might be needed to ensure that meaningful arbitrage can take place to ensure confidence in the market (if arbitrageurs would otherwise stay away from the market then this would reduce liquidity of the futures contract - to the disbenefit of the exchange).
Key point is that CME Group (Chicago Mercantile Exchange) will be offering them. Being able to transact Bitcoin derivates on a trusted derivatives exchange will be attractive to more conservative institutional investors.
Also, I don't think a decentralised exchange works for USD. Any token backed by USD has counterparty risk.
You're right about any token pegged to fiat (like USDT) having counterparty risk. The company offering it, the bank they keep their funds in, and the country's legislation. I wonder if something decentralised will emerge that will effectively minimise those risks.
Crypto is hard to get write, and people suck at key management.
If you're going to store your own bitcoin, please do several 'test runs' depositing tiny amounts and practicing retrieving it. Understand potential attack vectors. Too many stories of "I forgot the pin i used to encrypt my private key" or "I saved my private key in gmail and lost all my bitcoin when my email got hacked" or "I used a malicious wallet software and it stole all my coins".
Earnest investors understand they have a responsibility towards their clients, and will not resell something that ultimately depends on the trustworthiness of three guys from a startup registered in Hong Kong.
http://www.morrisoncohen.com/siteFiles/files/For%20Blockchai...
It will be quite interesting to see how institutional investors and the CTFC come down on this whole phenomenon. I do not share the unbridled optimism of many of my peers.
It's pretty hard to manipulate commodity futures prices with fake news but crypto currency market trends are pure psychology
You can arbitrage the price of mining equipment + electricity vs the cash value of shorting a bitcoin future. Mining rewards are approximately known along with the halving date, mining rigs have a known cost, electricity costs are predictable, etc. Every time BTC futures rise enough above your cost of mining on a risk-adjusted basis, sell more short and expand your mining operation.
That's the fundamental pricing dynamic. At least on the short side. The long side makes zero goddamn sense to me, but at least people can place a maximum value based on the forecasted cost of mining and put serious downward pressure on prices that way.
Conversely, the efficient markets hypothesis implies that in time, the prices of eTulips will converge on the values of the underlying security. But you're right in that it will likely be preceded by an influx of new greater fools.
There's no market that could absorb over 100,000 Bitcoins and pay out dollars without crashing the price. Who's going to pay out $0.6 billion in cash?
http://www.investopedia.com/terms/i/institutionalinvestor.as...
There's a name for this effect which I've forgotten. But it can be seen, for example, in the markets ignoring the risk of nuclear war during the Cuban Missile Crisis. The reason is the same: there's no use in considering nuclear war in your decision-making, because you'd be dead anyway.
It's like saying bitcoin is a hedge against the end of the world.
That spot prices of bitcoin is lower than expected, making their current "buy mining equipment, hook it up, and generate bitcoin" operations unprofitable. Miners as a group will be net short BTC futures for the same reason that corn farmers are net short corn futures.
The longs will in because of the shorts - since carrying costs are so low, the futures will trade below the spot price, which means buy-and-hold BTC investors are better off rolling BTC futures contracts than the underlying.
If you want to see the choice quote you’ll need to go to www.sci-hub.io.
If it was physically settled you could squeeze the shorts by having a last-minute unilateral grant of a side-token to everyone who possesses the underlying. The shorts have to come up with the token or cover the contract - either way, you have people who are forced to buy it to cover contractual obligations, and you probably own the only exchange capable of making transactions with NewToken (and maybe also you pre-mined some of bonus tokens to sell?)
When its cash settled, this is much less of an issue. No market? No market price, so it doesn't get included in constructing the index.
But on the other hand, since the parent comment was posted, Bitcoin price has increased 10%. And I'm pretty sure that I could sell before it drops 90%.
Well, let me share a secret - the demand is Chinese sneaking money out of the country. I know friends who help their buddies and charge a two-digit percentage to move their money out of mainland China. Here in Orange County, there are a lot of Chinese buying houses with cash, and it's a similar situation in the Bay Are, Vancouver, etc. Given more, and more people sneak out, the demand grows as well. The US is fine because fresh money flows into the US economy, but as we know, China realizes that even though some of the people sneaking money out are possibly close to the government.
I have and cannot have solid facts to prove this, but everything pretty much backs my theory and especially the correlation that the harder pressure China does, the higher the price goes!
But for you, it won't be a nice thing to hear one day that there's a total crackdown on this scheme and people who buy Bitcoin in advance to sell it suddenly want to get rid of it!
But US KYC regs are strict, so I wonder how they exchange massive amounts of Bitcoin to USD cash.
Your "instant bank transfers" claim is irrelevant. Traditional banking lacks the openness, borderless access, censorship resistance aspects of decentralized cryptocurrencies like bitcoin.
With traditional banking you are in a master-slave relationship, where your bank is the master and can wipe your money clean at a whim. Bitcoin means you are your own bank.
It's pointless to compare "instant bank transfers" with bitcoin, bitcoin makes traditional banking obsolete.
I'm not paranoid, I want the world to be a better place. Banks and governments are the cause of the global financial crisis/recession. Lots of families and people's future were destroyed by them.
The US is 4.3% of the total world population, there are other 6 and a half billion people in the world.
Most of the other 6 and a half billion are completely unbanked, they never had access to a bank account. Bitcoin can help those people.
> Something that solves a problem for <1% of the global population and some niche cases is of virtually no utility.
I don't know how you can say that. You must be blind.
What are those "more resilient technologies" that you speak about? I want to know, because all the other shitcoins are either more centralized or a scam and not worth looking at in my opinion.
I dare you to tell me another cryptocurrency that is more decentralized than bitcoin.
> I am disgusted by the kind of people Bitcoin attracts today and I don't want to be associated with that crown in any possible way!
What I want to know is why you associate the technology with the people, or why even generalize the whole community because of a few bad actors.
I agree there are many toxic people in bitcoin, but you know what? I don't give a shit, just ignore them I'd say.
There are far worse people in the current financial system, but you don't seem to be talking about that, I wonder why.
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>the stock market! With Robinhood and the likes - it's scam-free
what about the 2008 CDO fiasco? what about enron? the stock market is far from "scam free"
well no shit, obviously the citation going to be something i say. at least link to some specific comments.
>thus making a fool of yourself!
says the guy who's resorting to ad hominem attacks
What people miss is that the focus on "blockchain" was a way for the finance industry to talk about Bitcoin at a time when it could get you fired for doing so.
Forgive my ignorance of the finance world, but it feels like they are stretching definitions in order to frame this as approaching crude oil or pork bellies when it's more of an options contract.
Because money.
Or more specifically, someone is willing to sell these futures to someone who is willing to buy them.
For this discussion, let's entirely ignore credit risk (the risk this person doesn't pay) but consider market risk.
Like it or not, you carry the risk of bitcoin fluctuations. You might be comfortable receiving $6400 for your bitcoin next week. But bitcoin is volatile. Maybe bitcoin jumps to $8000. But maybe it drops to $4000.
If you're comfortable giving up the upside, for a chance to prevent that downside, this bitcoin future is for you.
You enter a future contract where you agree to sell one bitcoin in one week at a price of $6400 (if that's the going one week forward rate).
In one week, your person pays you the agreed bitcoin, which you then sell to the exchange and receive your $6400.
Meanwhile, for that week you can sleep at night knowing that if the bitcoin market crashes, you still get your $6400. And if the market rallies to a higher price, well missing out on that rally was the cost of being able to sleep at night.
This is what commodity futures were originally used for, eg farmers agreeing to sell their stocks at agreed rates without worrying about market fluctuations.
Companies do this too, eg hedging their cost of fuel to a known quantity in line with expected consumption.
Anything at all can be traded in such a way. What's useful about it is you are trading with the exchange, they take care of everyone's credit risk, hence they margin everyone. And they concentrate the interest in a monthly or quarterly date.
> more of an options contract
No, definitely not. An option contrast has asymmetric payoff, because options can be left unexercised. When you trade a future you are obliged to make the exchange at the appointed price and time.