Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live

I'm not saying they'd be 1-to-1 off the bat. I'm asking do forks have their own supply, and are no longer limited by the supply of the previous coin? If so, my question is when BTC runs out of things to mine a) why would miners that needed to process transactions even stick around hashing and not just go to the fork where they could actually make money? b) and doesn't this just mean technically you could create widely accepted fork from a major crypto like BTC, have a 0% transaction cost between each and essentially have them level out using purchasing power parity...basically just extending the initial money supply by making transaction costs 0 between the parent and the fork? Since cryptos aren't based on economic strength, or trade imbalances like fiat currencies, it seems you'd just easily be able to eventually make them hit parity for the mere sake of keeping computers (miners) around to verify transactions.

Bitcoin and others like it I feel are going to become far more centralized than people think, otherwise I don't see who the hell is going to use their computing power to verify transactions...which is really what miners are doing.

Maybe I'm missing something.

No, they just serve as a central point to match buyers and sellers so the buyers and sellers don't have to find each other themselves. They aren't making a market but they do get clearing fees.

More like match maker.

No more like a broker. When you buy stocks through your broker, all the broker does is to pass on your order to the exchange, and to report when it was executed. The broker doesn’t take any risk, other than you not making a payment after you gave the buy order.

If the broker was a market maker, he would keep an inventory of that stock and your order would be filled by the broker directly. Who would then report and clear the transaction on the exchange.

Clearing doesn't mean buying and selling.

There's not really a great analogy, but the idea is that Goldman is on the hook if one of their customers can't maintain the margin/haircut.

I can't see shorting it outright without being wheeled out on a stretcher. Options will be the best play to safely express a bearish position with asymmetric risk/reward assuming they aren't priced to insanely due to IV. Still at least you know your risk.

Neither CME or CBOE bitcoin futures are directly connected to bitcoins. Both will be cash settled (i.e. no bitcoin delivery). There will be no need for buyers, sellers or intermediaries dealing in bitcoin futures to buy/sell/own bitcoin.

Hmm, in trading, internalization is where a broker would fill a buy order from its own inventory instead of acting as the middle man it normally is. So not sure why that idea has been brought up.

To clarify, Goldmans are offering to buy* futures their clients want to sell, if they can line up one of their other clients/counterparties to buy it from Goldmans at the same time. Goldmans is acting only as an intermediary or a broker. The key idea for clients is that if you want to sell, you want to get a quick and good bid from your trading partner. Goldmans are not offering to do that. They won’t make a price straight away for their client, they will only broker trades, so they will need to call up others to find out what their price is, hold them on the line and then offer the price to the client. At the end of the trading day, all Goldmans will do is net off trades between their own counterparties. Goldman clients expect the company usually to act as market maker for futures trades. As a former sell-side trader, what that means is I can make my own prices for the client, buy their futures off them, hold them, and later in the day I can sell them myself, possibly to the exchange. I hold my own position, I assume my own risk, on a short term/daily basis. This is better for the client because they can get an immediate market, they don’t have to wait for me to call someone else.

In a way Goldmans are saying they won’t trade against their own clients. Given their history with the CDOs (think The Big Short), and given how opaque the underlying Bitcoin market is, this seems to me to be a covert reassurance that they won’t be working against their clients.

* or sell obviously.

I believed the futures are “cash settled”, basically betting on the price of Bitcoin on other exchanges, not real Bitcoins.

You can avoid the fees on some bitcoin exchanges if you're a market maker, and with the volatility that's pretty easy most days. I made a couple 0% fee trades today alone. But, the second part is definitely true... you still need deep pockets to hold a long position.

Buy and hold doesn't have any recurring fees. If you look at the opportunity cost between crypto and any other financial security in the market, its an easy decision.

"Fees"

I see the margin lending rates on some exchanges right now being 0.003% daily. This is for coins that move 10% a day.

Probably fair to assume fees aren't what the traders lose sleep over.

Exactly, which is why the safer bet is going long on high market cap coins, not small volume coins where pump and dumps can cause liquidation events.

Very well said, Both of these comments , capture the essence of STATE of Crypto trading unregulated markets of today .

> I've always laughed watching the cultist end of the crypto community up on their imaginary moral high horses talking about how much "better" crypto was than banks and regulated markets..

> given the fact that crypto markets basically represent all of the shady shit manipulators in regulated markets would love to do but can't. reply

> +1. It's laughable. Segregated accounts, position limits, circuit breakers, margin limits, spreads across duration to reduce risk, etc are all GOOD things. The counter party risk in the exchanges right now is HUGE in the bitcoin world. Pass on that.

The futures are cash settled, none of the futures exchanges need to own any bitcoin at all.

The currently proposed CME and CBOE futures are cash settled. No actual bitcoin is involved. Neither the buyers or sellers of the futures, nor any other entities involved, will need to buy/sell/hold any bitcoin.

> "The only value of bitcoin is what the other guy'll pay for it," Dimon said. "Honestly I think there's a good chance of the buyers out there are out there jazzing it up every day so that maybe you'll buy it too, and take them out."

Is there any reason to consider this statement inaccurate?

He said he didn't believe in it and wouldn't allow his traders to trade it (i.e. to make a market). But passing client orders is a different matter.

As I understand it, that's true only if there's a balance of buy-side and sell-side hedgers. Owners and miners are sell-side hedgers. Who are the buy-side hedgers?

Can you do an "Explain it like I'm 5" of this? I don't doubt you but I'm struggling to make the connection. Will futures affect the pricing of the underlying asset? (I don't think so?)

I think you are saying "futures reduce volatility for the trader" but I'm not sure.

I wouldn't be surprised if someone in the IT department explained to him that they are using some kind of consensus based mechanism (zookeeper, etcd, consul etc), that works just like a blockchain, to manage the bloomberg infrastructure. He then goes on tv and tells the world that bloomberg is using The Blockchain. Just wild speculation but its seems plausible to me.

Edit: a quick google lead me to Bloomberg's consul deployment cookbook: https://github.com/bloomberg/consul-cluster-cookbook/blob/ma...

You just provided a reason to use a block chain, not a reason that it is implausible.

Whether or not it is something you think of as a good reason, “marketing” is a real reason things get done in businesses.