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Hopefully it's not cash settled like the CME. That is the worst idea ever, and will probably cause a lot of people to get screwed over by market manipulation. E

Hopefully it's not cash settled like the CME. That is the worst idea ever, and will probably cause a lot of people to get screwed over by market manipulation. Especially since the CME is basing the cash settlement price on a single exchange: GDAX. Anyone can go to GDAX and crash or spike the price for one minute at 4:00pm any day and trigger a bunch of margin calls on the CME. Especially considering how easy it is to make a bitcoin transaction (compared to things like wheat, or oil...) it really should be "bitcoin settled".

wmf 9y ago
It's not just GDAX: http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.html http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.ht...
- fragsworth 9y ago
  Oh, I didn't realize. At some point I read it was just GDAX. Even still, cash settlement is terrible.
  - wpietri 9y ago
    Why's that? For some derivatives, cash settlement is the only thing that makes sense. E.g., look at their weather derivatives. It's not like anybody wants to take delivery on a petagram of cold air. The majority use case for Bitcoin isn't using Bitcoin at all. It's speculating on Bitcoin. Those people definitionally don't care about Bitcoin for its own sake. I'm pretty sure the exchanges are offering these not because anybody actually has forward needs to buy or sell Bitcoin, as they would with, say, wheat. People just want to speculate. For those people, cash settlement is exactly what they're after.
misja111 9y ago
>> it really should be "bitcoin settled". Sorry but you can't have futures on bitcoins that are settled in bitcoins.
- reverend_gonzo 9y ago
  Why not? CME has futures that are settled with physical delivery. It definitely makes it a pain for post-settlement management, and would likely prevent a lot of people from trading those futures, but why exactly is it not possible?
brndnmtthws 9y ago
Agreed. It's kind of a farce, and it seems like they're merely hijacking the Bitcoin name without actually dealing in Bitcoin.
- wmf 9y ago
  Apparently there have been cash-settled futures on a whole bunch of commodities for years now, so this sounds like another case of "I just discovered how finance works and I don't like it".
  - brndnmtthws 9y ago
    Bitcoin differs from commodities like gold in that it's something which can be trivially transferred electronically. It doesn't make much sense to 'buy' cash instruments when you can just get the real thing.
    - wyldfire 9y ago
      Holding any commodity comes with a huge amount of risk (what do I do with these oil barrels? ... livestock? ... crops?). Settling futures would involve moving these things from place to place. But whither bitcoin, you say? Moving those is easy! Yes, but holding them is hard. Who wants Your Favorite Mutual Fund to hold bitcoins? Not them, that's for sure. There's much more risk there than necessary.
      - nicky0 9y ago
        In what way is holding Bitcoin hard? That's the point of it. It's a store of value that's easy to hold directly.
        wyldfire 9y ago
        If you hold it, you own the risk of securing it. If I were a mutual fund, I'd much rather pay a premium to someone with expertise (like an exchange or some agent of the exchange).
vasilipupkin 9y ago
I disagree completely. Cash settled futures let people bet on bitcoin without ever touching bitcoin itself. For example, suppose I am a huge bitcoin hater and want to bet that bitcoin will go down 100% in the next 3 months. Why force me to worry about wallets, etc.? I just want to have a way to express my conviction without messing with all that stuff.
- minimax 9y ago
  Lots of people trade physically settled commodities futures contracts without handling the underlying products. You just have to make sure you close or roll your position before it settles.
  - vasilipupkin 9y ago
    Of course, but you could get stuck in a position. What's the point when cash settling accomplishes the same thing ?
    - jnordwick 9y ago
      Physically settled allows the future to better match the price of the underlying since you can take or give delivery in it.
      - vasilipupkin 9y ago
        That's not correct. They still have to pick a settlement price. Physically settled futures makes sense when customers are interested in the commodity itself and cash settled makes more sense for pure speculation.
        jnordwick 9y ago
        There are many products that are settled both ways, and some financial futures that are physically settled.

wmf 9y ago

It's not just GDAX: http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.html http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.ht...

fragsworth 9y ago
Oh, I didn't realize. At some point I read it was just GDAX. Even still, cash settlement is terrible.
- wpietri 9y ago
  Why's that? For some derivatives, cash settlement is the only thing that makes sense. E.g., look at their weather derivatives. It's not like anybody wants to take delivery on a petagram of cold air. The majority use case for Bitcoin isn't using Bitcoin at all. It's speculating on Bitcoin. Those people definitionally don't care about Bitcoin for its own sake. I'm pretty sure the exchanges are offering these not because anybody actually has forward needs to buy or sell Bitcoin, as they would with, say, wheat. People just want to speculate. For those people, cash settlement is exactly what they're after.

misja111 9y ago

>> it really should be "bitcoin settled". Sorry but you can't have futures on bitcoins that are settled in bitcoins.

reverend_gonzo 9y ago
Why not? CME has futures that are settled with physical delivery. It definitely makes it a pain for post-settlement management, and would likely prevent a lot of people from trading those futures, but why exactly is it not possible?

brndnmtthws 9y ago

Agreed. It's kind of a farce, and it seems like they're merely hijacking the Bitcoin name without actually dealing in Bitcoin.

wmf 9y ago
Apparently there have been cash-settled futures on a whole bunch of commodities for years now, so this sounds like another case of "I just discovered how finance works and I don't like it".
- brndnmtthws 9y ago
  Bitcoin differs from commodities like gold in that it's something which can be trivially transferred electronically. It doesn't make much sense to 'buy' cash instruments when you can just get the real thing.
  - wyldfire 9y ago
    Holding any commodity comes with a huge amount of risk (what do I do with these oil barrels? ... livestock? ... crops?). Settling futures would involve moving these things from place to place. But whither bitcoin, you say? Moving those is easy! Yes, but holding them is hard. Who wants Your Favorite Mutual Fund to hold bitcoins? Not them, that's for sure. There's much more risk there than necessary.
    - nicky0 9y ago
      In what way is holding Bitcoin hard? That's the point of it. It's a store of value that's easy to hold directly.
      - wyldfire 9y ago
        If you hold it, you own the risk of securing it. If I were a mutual fund, I'd much rather pay a premium to someone with expertise (like an exchange or some agent of the exchange).

vasilipupkin 9y ago

I disagree completely. Cash settled futures let people bet on bitcoin without ever touching bitcoin itself. For example, suppose I am a huge bitcoin hater and want to bet that bitcoin will go down 100% in the next 3 months. Why force me to worry about wallets, etc.? I just want to have a way to express my conviction without messing with all that stuff.

minimax 9y ago
Lots of people trade physically settled commodities futures contracts without handling the underlying products. You just have to make sure you close or roll your position before it settles.
- vasilipupkin 9y ago
  Of course, but you could get stuck in a position. What's the point when cash settling accomplishes the same thing ?
  - jnordwick 9y ago
    Physically settled allows the future to better match the price of the underlying since you can take or give delivery in it.
    - vasilipupkin 9y ago
      That's not correct. They still have to pick a settlement price. Physically settled futures makes sense when customers are interested in the commodity itself and cash settled makes more sense for pure speculation.
      - jnordwick 9y ago
        There are many products that are settled both ways, and some financial futures that are physically settled.