4 ms·
On a very basic level, I get most of that. But in the cases you mention, you're actually buying a contract based in the actual asset/security you're targeting.
by mdip 9y ago
On a very basic level, I get most of that. But in the cases you mention, you're actually buying a contract based in the actual asset/security you're targeting. In this case, it sounds like you're buying an asset that is priced based on the asset/security (BTC) but that outside of that price doesn't involve actually doing anything with BTC. Is my assessment here completely insane or am I somewhere near understanding what I've read in that article?
- superbrama 9y agoNo your assessment isn’t insane; instead you’re visualizing how they’re related and it’s important to understand it. CME does daily mark to market pricing so the futures price will always fall back in line with the “bitcoin index” which is based on the actual spot market. CME futures typically close once daily for a brief time (each market has its own schedule) and price settlement (the price adjustment) occurs around that downtime. This is distinct from most btc exchanges which as far as I know, operate round the clock (could be wrong on that point, I don’t actively use various btc exchanges). If someone were to sell a whole lot of futures and drive the futures market price way down relative to the spot market, another participant could then come in as a simultaneous buyer of the futures and seller of the spot market, pocketing the difference knowing the price will be marked to market daily. Such a natural force helps to keep the prices correlated in soft real time. Beyond that you’re correct it’s just a way to gamble on the side :) nothing to do directly with real bitcoin