One of the main features of Bitcoin is the predictable growth in its supply and the inherent inability to create it at will, like fiat is created. Bitcoin is kind of like gold in that respect. We know, more or less, how much gold exists and how much comes out of the ground and its supply, like Bitcoin’s is limited.
Future contracts are obligations to buy or sell a given amount of the underlying commodity at some point in the future. Most future contracts never mature. They are closed out before their maturity date. When you write a contract to sell a commodity, you don’t actually need to possess it until the maturity date. If you close your contract to sell by buying, the contract ceases to exist. In other words, you create the commodity, virtually, with a sell contract and destroy it with a buy.
The reason I brought up gold is that it is a perfect example of how futures are used to manipulate the supply and set an artificial price. For several years now, whenever the price of gold reaches about $1,300, a $4 bln sell contract hits the markets, usually outside the trading hours. If needed, it is followed up by another $2 bln the same way in another week. With the several tons of virtual gold this creates, the price goes down to the range Central Banks prefer. Bankers call this process “Whacking Gold”.
By trading Bitcoin futures, the central feature of Bitcoin and gold, limited supply, becomes irrelevant. Its price is open to manipulation to anyone with enough fiat to “whack it” at will. Who has enough fiat to manipulate Bitcoin price through futures? Same people that have the fiat to manipulate gold. Same people who create the fiat. Central Bankers.
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STOPThis really isn't accurate at all. Gold is a physical commodity, with a very high barrier of entry for anybody to mine it. Those that mine it control the physical supply, that, and demand, is the only thing that affects the price.
And we don't really know how much gold is out there. Its hidden in the ground.
We know how much Bitcoin is out there, we know how much there will be, and we know when they'll be introduced into the ecosystem. This cannot be said of gold.
Futures does not change the supply or demand, unless somebody holds the actual physical asset to buy or sell.
The only way central bankers can get their hands on Bitcoin is to buy it from someone that has some. This will push the price up on the open market.
Dumping their coin will bring the price back down, back to where we started more or less.
The point is that Futures are a tool to create an unlimited supply.
But they don't create any supply.
It's someone betting on the future price of bitcoin. Has nothing to do with the actual coin or the chain.
By selling futures, you are selling Bitcoin that doesn't exist and futures transactions set the price of the asset. Asset price is derived from futures contracts .
No. You are not selling Bitcoin because you don't own Bitcoin.
Supply and demand sets the price of the asset. Nothing else.