Bitcoin futures launch tomorrow (Dec. 10) on CBOE and on December 18th for CME Group. Many people speculate that the cause for Bitcoin's run-up recently is over anticipation for these Bitcoin futures. In this video, I discuss the potential impact of futures on Bitcoin's price.
First and foremost, I suspect liquidity will be lower than expected. The target group for Bitcoin futures are institutional investors and wealthy individuals, both of which tend to be more cautious. Given the warnings from FIA, Interactive Brokers and many others, these larger investors will likely be more reserved until the first expiration occurs and they have some experience watching the volatility in the futures themselves.
I did a brief explanation of cash-settled futures in the video, but I'd recommend you seek other sources to flesh out your understanding further. For example, I accidentally implied that the initial margin requirement and mark-to-market process is done based off the spot price rather than the settlement price. The explanation I gave in the video is good enough for laymen, but if you want to trade these, then you'll want to do some serious reading. I might do a video showing how to actually trade them in the future and get more technical.
The initial margin requirements are already high for Bitcoin and might increase depending on volatility. Certain brokers are already implementing higher than required initial margin requirements and are forbidding their clients from going short. Maintenance margin requirements will likely be in flux as well. Price limits might be tested more frequently than anticipated, leading to a choppy futures market which then screws with the underlying spot market. All of this is to say that many investors will wait before pumping significant amounts of capital into this nascent asset class.
Given this, I suspect this might be a "sell-the-news" type event and we might experience a correction following the CME Group futures launching if there are difficulties associated with their clearing. Note that CME Group has much higher contract volume than CBOE, so the CBOE futures launch will likely be more useful as an indicator of what to expect when CME launches.
I also forgot to note in the video that CME Group contracts are for 5 Bitcoin, which may have confused some of you when I said the initial margin requirements would be exceptionally high for CME Group options despite the fact they are going with lower initial margin requirements (35% vs. 44%) as a percentage of the contract value.
In the long-term, futures are excellent news for Bitcoin. They increase liquidity in a somewhat illiquid market, will decrease pricing inconsistencies (arbitrage), improve price discovery, and reduce volatility. The short-term will see volatility rise (likely) due to leverage, but this effect should reduce over the following months. Ideally, this opens the door for a Bitcoin ETF down the road as well. Eventually, more institutional investors will jump in as risk declines - but this will be a delayed effect (in my opinion) rather than an immediate one.
I would love to hear your thoughts. Let me know in the comments below and thank you for watching!
Bitcoin Futures seems something like mortgage backed securities. I remember what happened to them in 2008-2009. Making money out of nothing is truly a genius idea but be careful.
How the same? MBS were packaged products, where bankers took 1,000s of grade D mortgages, and by putting a lot of crap together into a single package they got risk ratings agencies to go along with the gig so to speak, the new packages were classified as grade A securities, and could be resold at higher prices.
How does that have ANYTHING to do with Bitcoin Futures?
If you don't understand what you are talking about, there is always the opportunity to keep your mouth shut, as opposed to opening your mouth and removing all doubt.
Maybe you think the nobel prize winners are also comparing two not-comparable assets?
http://www.businessinsider.com/paul-krugman-says-bitcoin-is-a-bubble-2017-12?utm_content=buffer1fe57&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer-bi
You are insulting me! What I am saying is my business and if you don't agree it is your choice but think how you express it.
And yes, I do now the fundamental differences between Mortgage backed securities and futures. I am just comparing this two, because they are both financial instruments created out of "NOTHING"
And again. If you want to say something, EXPRESS your words in a way that don't make you look like an "Idiot".
What I am saying is my business.
Maybe if you wanted that to be true you wouldn't be posting on a social media site, where everyone is encouraged to comment. And encouraged to call out nonsense comparisons when they see them.
If you want what you say to be your business only, maybe you shouldn't post on steemit.com?
so buy and hodl correct???
This has been true since the beginning...
https://steemit.com/bitcoin/@jerseynash/bitcoin-futures-what-to-expect
@cryptovestor - I've been a stock futures/options trader for over 10 years and the volatility of BItcoin is way too much to expect institutional investors to buy BTC futures (or Short sell them). This kind of volatility could make speculators millions in no time and could make institutional investors go bust likewise also - unless of course the exhchanges put enforced circult limits.
Anyway, the thing to take out of this is that institutional investors have finally now started taking Bitcoin more seriously and that could lead to huge price inflation once more money starts flowing into bitcoin.
Also the Black-Scholes valuation of contracts would make the premiums very very high due to underlying volatility.
However, as best as I understand the proposed contracts will be cash settled in USD which implies that even a dreaded short squeeze of naked contracts will not automatically mean a rush to buying BTC to cover the positions.
From what I know there won't be Bitcoin options contracts only futures.
But you're right if options were to be introduced, the implied volatility will result in very high premiums.
Futures may divert money AWAY from Bitcoin
https://steemit.com/bitcoin/@rockwellontherun/bitcoin-what-will-happen-tomorrow-when-futures-start
Nobody knows what is gonna happen but, the sure thing is that this is gonna be the next source of speculation, once that Chinesse are out, and I think this could be a bad thing for crytpo because they are melting with the people that had alwayd created bubbles, which could affect very much bitcoin and cryptos in general.
Pretty slow so far. CBOE has scared off most potential early speculators with lots of warnings
https://steemit.com/btc/@davebrewer/xbtc-trading-opens-at-cboe-big-shorts-nope-slight-up-tick-in-btc-price-in-the-initial-futures-contracts
While institutional investors ARE likely to have a tepid response due to loss aversion behavior, the common man is just beginning to wake up to growth opportunities in BTC. Expect steady rises in value that outperform expectations as lightening networks get implemented and brokers/executives begin receiving a portion of their bonuses in BTC. Once Paypal enables BTC transfer, it is game over for the USD. The net result is that you will be able to buy commodities like gas and groceries in BTC.
Yes, institutional investors will be late to the game but grassroots support will continue to drive demand. Once these futures markets mature, waves of value growth should occur.
I would expect a few manipulated crashes from those in Goldman Sachs and the compromised Bitcoin Foundation. The common people who still don't understand BTC will sell, but support by people like us and the institutional investors will create even more swift rebounds than we have now.
Your prediction was dead on.
Tepid price action on opening
https://steemit.com/btc/@davebrewer/xbtc-trading-opens-at-cboe-big-shorts-nope-slight-up-tick-in-btc-price-in-the-initial-futures-contracts
Thanks. Mark the date that the first public report on activity gets released. That is the day institutional investors will have some data to work with and if it is good, they will finally start to drive prices higher.
Bitcoin futures? Meh...the real deal will be when ETF's get approved!
https://steemit.com/bitcoin/@xsid/bitcoin-futures-meh-the-real-deal-is-etf-s
Don't ya'll think futures on btc are a paradox? I mean, the crypto world was born to fight again the system that caused the financial crysis in 2008, what do you think? Interest topic btw!
Thanks very much for this useful info..maybe liquidity will not be an issue...we will see...upvoted
followed upvoted thanks for sharing
great! thanks for sharing. i am glad to know i am not the only one trying to approach some info on Futures to try to decrease -at least in a bit- the huge confusion out there. Regards.
I with your posting this one, hopefully you can always share the post like this and can be useful for everyone. do not forget vote got me😊👏👏
I think it could be difficult for these new institutional monies to enter the spot market as institutions might be unable to deal with cryptocurrency exchanges (who operate the spot markets) for compliance/ regulatory reasons.
This affects hedging and arbitrage activities and could be another reason for the lower than expected institutional demand you mentioned.
This is my analysis on the impact of BTC futures summarised into 5 points. Like to hear your views.
Nice to see you on here! I'm a bit fan of your videos :)
Are we acting like spoiled brats now that the price rush is cooling?
https://steemit.com/cryptocurrency/@xsid/three-days-ago-usd13k-bitcoin-was-a-bargain
Thx for the really good content :)
ank you very much for your recommendations. I think they will be useful for many people. All the best.
Can´t wait to see!!
This is just a beginning !!! Bitcoin has lots of potential to grow and get into mainstream adoption !!!
Not for all, but for everyone. Shorts dont create anything. HODL
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WANT TO EARN INTEREST OF YOUR BITCOINS
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WANT TO EARN INTEREST OF YOUR BITCOINS
https://aaafinancial.usitech-int.com/
WANT TO EARN INTEREST OF YOUR BITCOINS
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