With the approaching launch of Bitcoin futures by the CME and CBOE an interesting question to ask is can one really use them to hedge downside risk? For all of the hype on the futures contacts on Bitcoin it remains to be seen if this is anything other than a wagering platform as apposed to a viable risk management tool capable of being used by cash market participants in the Bitcoin market. At this time it seems unlikely that these contracts can be used as a legitimate hedge for a long position in BTC.
Margin requirements are not yet released and the ability to borrow margin capital for a hedged position is highly unlikely. The risk of having a margin line of credit pulled for those short on a hedge is possible and will not be good if the futures trade a significant premium to the cash. Details on margins both speculative and hedge are necessary to gauge the opportunity for use of these as a long cash BTC hedge.
Many FCMs will take a wait and see attitude on these before allowing access to their clients. Their risk departments will need to do some modeling on the risk side and if they are comfortable then allow access to the clients they have that meet the financial requirement they feel is necessary to clear their business. For now I think the lions share of the volume will be speculators and possible arbitrage companies looking to profit from the basis spread to cash and its
movement to 0 at settlement.
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