According to this article, Terry Duffy, the CEO from the worlds largest derivative exchange - CME Group - revealed that Bitcoin futures trading will likely be ready by the second week of December. CME Group made headlines recently when they disclosed that they were in the process of getting the Bitcoin futures contract approved.
What is a futures contract? It is a legal contract made on a futures exchange to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.
Futures contracts are derivatives because its value is affected by the performance of the underlying contract. Similarly, a stock option is a derivative because its value is "derived" from that of the underlying stock. While a derivative's value is based on an asset, ownership of a derivative doesn't mean ownership of the asset.
For example, if I enter into a futures contract with another party to buy Bitcoin at 10k per share on January 10, 2018 and come January, 10 the price of Bitcoin is 15k, then I've made 5k per share. However, if the price is 5k, I still have to pay 10k whereby i'm the one that loses 5k per share (DOH!)
You can see that market participants are either speculating or hedging.
The Big Deal
Bitcoin futures are a big deal because it opens up the another avenue for Wall Street capital to enter the cryptocurrency market that will increase liquidity and presumably, the price of Bitcoin.
It will also open the door for the Securities and Exchange Commission (SEC) to review Bitcoin ETF applications that trade in future contracts. The SEC previously said that they wouldn't review Bitcoin ETF applications until futures contracts were listed on an exchange.
Futures contracts, and the possibility of cyrptocurrency ETFs are a positive direction for the crypto market and I have been waiting for the opportunity to invest a portion of my retirement portfolio into crypto.
BREAKING NEWS!!
A new index called Reality Shares was just announced. The index will track companies in the blockchain industry.
Like most indexes, Reality Shares will have a wide range of companies however, it has featured the following 5 companies:
- SAP sees blockchain as a promising way to simplify complex multi-party processes and create trust among participants. The company is using its expertise in 25 industries and across all lines of business to actively explore blockchain technology and to help clients capitalize on its potential.
Overstock operates the tZERO exchange, which has been at at the forefront of the blockchain revolution for years, working closely with regulators since 2015 – launching the world’s first SEC-compliant ATS for blockchain assets, the first private blockchain bond offering, and the first ever public issuance of a blockchain security.
Hitachi is a founding member of the Hyperledger Project and consortium, and has partnered with Tech Bureau to use the NEM-based Mijin Blockchain platform for Hitachi’s point management solution “PointInfinity,” which serve 150 million members and users.
Accenture is working closely with leaders from across a broad range of industries, governments, consortia, the academic community, and its key technology alliances to move blockchain technology forward so that, ultimately, it can help improve the way the world lives and works.
HIVE Blockchain Technologies is building a bridge from the blockchain sector to traditional capital markets. The company has strategically partnered with Genesis Mining Ltd., the world’s leading cryptocurrency mining hashrate provider, to build the next generation of blockchain infrastructure.
In a press release, Reality Shares says that they filed an ETF application with the SEC and that the blockchain index will be the basis for the ETF.
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Traversing the Cryptosphere,
Kryptonaut
Do you think this will be good for BTC in the long run? Can this lead to market manipulation?
BTC cap is getting pretty big for direct manipulation. Indirect manipulation could be from releasing FUD. Maybe China news or some other country that regulates or bans digital currency. However, I don't think anyone would try to manipulate BTC just to make $ on futures. They would just manipulate in the direction they want and buy/sell directly. I'm no expert so I want to hear other opinions.
Don't necessarily see this as a sure sign that Bitcoin will rise. Futures inherently allow people (and big companies) to short the currency. There would be a lot of people out there who would love to earn money off of Bitcoin failing.
The futures is great for the longevity of the crypto-verse with this news. But also be cautious in the short term. We may see drops in Bitcoin due to lots of people wanting it to short the currency and dump because of it.
No doubt, but would anyone manipulate BTC price on a certain date just to win futures contracts? I assume that it's less risky to short without entering in futures as a person/company can exit a position at any time.
From my understanding a lot of the time short positions are opened up as a hedge against your initial investment. So if someone has a large investment in Bitcoin and also has a short position against it, then it isn't unreasonable to think that a co-ordinated dump could create sure-fire profits.
Great news. Just taking everything in the crypto-verse with a grain of salt :)
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