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CBOE Will Start Bitcoin Futures Trading on December 10
- sschueller 9y agoI wonder how this all will work with such huge transaction delays.
- jcousins 9y agoAll settled in dollars AFAIK.
- chvid 9y agoYes - you will be able to trade much faster than if bitcoins actually changed hands. One thing this allows is shorting - unclear what it means wrt current price.
- kss238 9y agoThey're trading futures not bitcoins directly.
- shortoncash 9y agoThis doesn't matter. The HFT arbitrage guys (if they haven't already) will move in to bring the other components of the fragmented market inline. This is just a natural progression with markets becoming more efficient.
- alwaysnotright 9y agoIf I understood it correctly, futures won't have any actual transferring of bitcoins so it doesn't matter really.
- chollida1 9y agoI think these futures will do a few things for bitcoin. - allow an explosion of ETF's, including levered ones, to begin trading. With futures you can now hedge out your bets so it should, at least in theory, be easier to find a counter party to write you a swap against bitcoin volatility. It also lays the ground work for the SEC to see a functioning market for these products which they ahve said is a prerequisite to allow bitcoin ETF's to trade. - give some rules around what's considered a fork and what should be ignored in the bitcoin world. Each of these products will provide some "adult" guidance to other markets as to which alt coins, forks, etc should be considered vs ignored. From an implementation perspective there are two differences I see between the COBE and CME implementations. 1) The CBOE’s contract size will be based on a single bitcoin, while the CME’s contract size will be based on five bitcoins, a current notional value of more than $50,000. 2) The CBOE’s contracts will be cleared by Options Clearing Corp. while CME will clear its own futures. The CME has estimated that initial margin on the contracts — or the amount of collateral set aside relative to the value of a trade — may be as high as 30 percent, an unusually high amount.
- destructaball 9y ago30% is far too small of an initial margin for such a volatile commodity. The initial margin is expected to cover a the movement of an observable through making the margin call, the period of time the margin call could be filled, declaring the counter-party in default and closing out the position. This normally adds up to a minimum of 2 working days. Saying that it's beyond the realms of possibility for bitcoin to jump or fall 30% in 2 days seems ridiculous.
- baddox 9y agoDo you have any data on what the largest 48-hour jumps in Bitcoin price have been?
- pmontra 9y agoThis could be the largest one in absolute value: according to http://www.xe.com/en/currencycharts/?from=XBT&to=USD&view=1W http://www.xe.com/en/currencycharts/?from=XBT&to=USD&view=1W it went from 11258 USD on November 28 to 9136 on November 29. Then it went up and down again to 9217 on the night of November 30.
- tome 9y agoThe highest daily volatility ever was 15% and it's currently around 4%, according to https://bitvol.info/ https://bitvol.info/ . Two times the highest daily standard deviation ever doesn't seem so unreasonable.
- 1053r 9y agoThat's the highest AVERAGE ROLLING 30 DAY volatility. For example, on Dec 7, 2013, volatility between the high and the low was 54.6%. [1] However, it was lower for the other days of all 30 day periods that include that day, and averaged out to under 15%. 1 - https://www.coindesk.com/price/ https://www.coindesk.com/price/
- JumpCrisscross 9y ago
- stfwn 9y agoI feel like I must have a misconception about bitcoin. Coins are earned by calculating hashes for transactions. As the amount of coins grow the difficulty of calculating hashes increases. This limits the creation of new coins, which increases the scarcity of coins and thus their value. This keeps the incentive to mine at a more or less steady level, thus sustaining the network. But.. Why spend something that is guaranteed to become more valuable? If I had something in my pocket that I knew would become more valuable by systemic necessity, I’d save it as long as I possibly could. Doesn’t this completely undercut the idea of bitcoin as currency?
- paulcole 9y ago>Why spend something that is guaranteed to become more valuable? Nothing is guaranteed to become more valuable! In the US we’ve had a depression and even a recent recession to help teach us this. Guess it didn’t take.
- chairmanwow 9y agoBut it does make for a great investment asset and or store of value.
- Retric 9y agoPast performance is not directly related to future performance. Yes, buying BC 5 years ago was a good bet, that says nothing about buying them today and selling them in 5 years or even 5 days.
- pault 9y agoThis point gets discussed ad nauseam on every thread about bitcoin. I haven't heard a good answer yet.
- conanbatt 9y agoA pragmatic approach. The world holds incredible amounts of us dollars in the mattress. If your expectation of bitcoin were that its value just doesnt decrease you have an incentive to turn your cash positions into bitcoin. We could say people shouldnt have signficant cash reserves but reality shows otherwise.
- isolli 9y agoI wonder what the source of Bitcoin's price will be for settlement, and more importantly whether it will be immune from price fixing. One thing we know is that you can't trust market participants: https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal
- NOSHSHNACKERS 9y agomy 17 year old son texted me and said I should invest in bitcoin
- rb808 9y agoWill be interesting to see how closely these track BTC, both initially and in times of stress. BTC is difficult to short so if/when there is a sharp decline in price you have to rely on people buying futures instead of BTC outright. I suspect this isn't going to happen so on price declines the futures will fall further than BTC, also leading to bigger crashes in BTC. Maybe that is a good strategy, wait for some weakness and sell the out of it to see how far it crashes.
- wpietri 9y agoCould you say more about why you think the futures would crash further? My understanding is that these are cash settled, so this isn't like a normal commodities market where you actually have to deliver the underlying.
- lawlessone 9y agoIf they're cash settled doesn't that mean nobody even has to buy more bitcoin? Just a bucket shop?
- vasilipupkin 9y agoyes. To speculate on bitcoin nobody ever needs to buy any bitcoin anymore, if futures gain significant volume.
- rb808 9y agoThat's the interesting part we're going to find out. Yes they're cash settled on the expiry date so on the 3rd Friday of the month the future that expires that date will have the same price as BTC. When there is time to expiry though, what is the mechanism that keeps the prices aligned? If BTC is difficult to short natively, there isn't an easy way to keep the futures at fair price. IE if BTC is worth 10k and someone keeps selling futures down to 9.5k, why would BTC drop? Only if a buyer chooses not to buy BTC but buys the future instead. But if the future keeps dropping those guys will get scared off. The real thing is no one knows so we'll find out soon if/how this will work.
- ckastner 9y agoImagine the margin call you're going to get whenever the market swings wildly against your direction... I assume that most interested parties will use these for hedging purposes, but there's bound to be a few poor souls out there waiting to use these for speculation.
- scurvy 9y agoSince these are cash settled futures, a large move up may have the unintended consequence of generating more selling pressure. If you're hedging a long BTC position with futures, you could run short of cash required to maintain the position. Thus, you would sell BTC to get USD. If this were a BTC settled contract, you would just hand over the BTC at delivery. Since these are USD settled, futures might put a damper on the rate of increase.
- karpodiem 9y agoAre CBOE and CME are providing liquidity (fulfilling buy/sell orders) or are they simply operating a pool where traders bring their own positions and act as a settlement platform between participants? How can they grantee 'legality' of the coins being traded by those participants in the 2nd scenario? Let's say then the coins being traded in the 2nd scenario are identified by the IRS as 'bad coins' - will they freeze the coins held by that account until the legal dispute is settled? How can you grantee the legality of coins in an option contract if the coins held by one party prior to the contract expiration are seized? I'm very curious how they're going to handle these scenarios. Personally, I wouldn't trade on this.
- joobus 9y agoI'm pretty sure this is a cash-settled future. No coins are changing hands.
- JumpCrisscross 9y agoThese are all cash-settled futures. Suppose I buy and you sell a future marking Bitcoin at $10,000. The next day, Bitcoin is $11,000. You give me 1,000 U.S. dollars. (The exact mechanics depend on various factors. I’m stylising.) The next day, Bitcoin falls to $9,000. I give you 2,000 U.S. dollars. Et cetera until the contract is over. Many investors want exposure to Bitcoin. A significant subset therof are perfectly happy with the financial system as is. They want Bitcoin to look like any other financial asset. These futures are the beginning of Wall Street serving that demand. Disclaimer: This is not investment advice. Not all futures work like this. Review investments with a lawyer and/or investment advisor.
- swarnie_ 9y agoBitcoin is a currency right? Where is the Forex level leverages being offered? We need to speculate on bitcoin with 100:1 or 200:1 to really get this bubble expanding. Failing that, ill settle for a x3 ETF
- Uw7yTcf36gTc 9y agoyour tone makes it sounds like you are being sarcastic. in case you weren't, you can do 100x leverage here: https://www.bitmex.com/?lang=en-US https://www.bitmex.com/?lang=en-US
- down 9y agoI had trouble understanding bitcoin myself, and therefore stayed away from it, but what made me understand it, if shinny metals and compressed carbons pieces have huge markets, eg. gold has a cap of 7 trillions and bitcoin is just 150 billions, and just work why bitcoin would not also work, even when you buy gold jewellery or diamonds, in the back of your mind is the resell value, (hedge against inflation), not that they look much better than a fake, or the coated version. Maybe in US inflation isn't a problem but in my country until a few years 7% inflation was low, although maybe the official inflation is low, but as far as I know asset prices have gone up due to quantitative easing.
- wpietri 9y agoAn important difference: gold and diamonds have significant non-financial use. The majority of gold mined each year, for example, goes to jewelry and industrial use. And the track record for that demand runs back millennia.
- down 9y agogold industrial use is like 10%, jewelry as just a fancier way to store gold, so 90% of gold is so valuable because is valuable, and for so many years, meaning something can be valuable without intrinsic value, aka bitcoin.
- vasilipupkin 9y agoI disagree. Gold is valuable because physical commodities and physical things, like jewelry, etc. tend to track inflation over time. As an investment, gold is terrible. Just look at the chart of gold prices over a long period of time.
- hackinthebochs 9y ago>Gold is valuable because physical commodities and physical things, like jewelry, etc. tend to track inflation over time. I don't know how to read this other than as stating the same thing with different words, i.e. "tracking inflation" is just another way of saying that its valuable.
- blibble 9y agoit will be interesting to see how they determine the settlement price my prediction: huge amounts of bogus trades every day to manipulate it
- Uw7yTcf36gTc 9y agoCME will be using Bitcoin Reference Rate (BRR). I don't believe CBOE has published how they will do theirs. http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.html http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.ht...
- ryan0x00 9y agoon CME at least it's a weighted average: "Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR." http://www.cmegroup.com/media-room/press-releases/2017/10/31/cme_group_announceslaunchofbitcoinfutures.html http://www.cmegroup.com/media-room/press-releases/2017/10/31...
- xutopia 9y agoWill this have an effect on the price of BTC? Anyone have any idea or can speculate as to what happens on December 10th?
- aerovistae 9y agoHahahhahahha...
- dang 9y agoPlease don't do this here.
- mxwsn 9y agoI found this article helpful: https://www.bloomberg.com/gadfly/articles/2017-12-04/bitcoin-s-diverse-futures-contain-buyers-and-sellers https://www.bloomberg.com/gadfly/articles/2017-12-04/bitcoin... tl;dr: - Increase access to btc (futures can be more liquid than BC itself, which has large transaction costs and transfer times) - Probably reduce price volatility in general, but futures could also compound speculation My guess is that BTC will rise in price, and I think the recent price increases are partially explained by the news of future markets.
- KasianFranks 9y agoI'm a fan of Bitcoin but here's the truth (source: me, I ran a public company): The real boon here is for new cryptocurrencies as opposed to Bitcoin as it will experience naked shorting resulting in artificial 'sell pressure' from large institutions and hedge funds due to these futures contracts. In other words, you can take out a large short position without needing any fulfillment while at the same time it factors as 'shares short' against Bitcoin. 'Shares short' is a major component used by institutions to calculate or re-price to the downside and when these numbers are inflated that can result in inaccurate pricing for the benefit of the manipulator. There are plenty of examples of this and one of the most high profile cases is related to OSTK (Overstock): https://en.wikipedia.org/wiki/Patrick_M._Byrne#Campaign_against_naked_shorting_and_analysts https://en.wikipedia.org/wiki/Patrick_M._Byrne#Campaign_agai... It's a high-level form of manipulation. This will also reduce Bitcoins volatility and opportunity for large gains in short periods of time. Of course the reverse is true if institutions want to battle it out on the short and long side but meanwhile the banking divisions of investment banks (JPMorgan et al) remain scared to death of Bitcoin. Ultimately, Bitcoin will have to have more institutional allies and supporters than the worlds banks (banks hate Bitcoin, it makes them irrelevant in the near future) which is quite possible. New cryptos with low floats (low circulating supply) won't be affected as much thereby offering larger gains in shorter periods of time which will attract more of the typical cryptocurrency day traders and traditional traders. More on this here: https://news.ycombinator.com/item?id=13844765 https://news.ycombinator.com/item?id=13844765
- bobcostas55 9y agoThat's not how futures work. For every long futures contract there is also a short one, the net position is always zero. There are also no shares involved.
- KasianFranks 9y ago"The Truth About Naked Short Selling" https://www.investopedia.com/articles/optioninvestor/09/naked-short-selling.asp https://www.investopedia.com/articles/optioninvestor/09/nake... "The basic form of short selling is selling stock that you borrow from an owner and do not own yourself. In essence, you deliver the borrowed shares. Another form is to sell stock that you do not own and are not borrowing from someone. Here you owe the shorted shares to the buyer but "fail to deliver." This form is called naked short selling. These short sales are almost always done only by options market makers because they allegedly need to in order to maintain liquidity in the options markets. However, these options market makers are often the brokers or large hedge funds, who abuse the options market maker exemption. (For more, see How To Work Around A Market Maker's Tricks.) Shorting Without Failing to Deliver There is another form of short selling, which I describe as synthetic short selling. This involves selling calls and/or buying puts. Selling calls makes you have negative deltas (a negative stock equivalent position) and so does buying puts. Neither of these positions requires borrowing stock or "failing to deliver" stock. A collar is nothing more than a simultaneous sale of an out-of-the- money call and a purchase of an out-of-the-money put with the same expiration date. Another way to short sell is to sell a single stock future, which is equivalent to naked short selling. No shares are borrowed, however, and no shares are failed to deliver..." "... There are similar future transfers if you have sold calls or sold single stock futures. When you buy puts and fully pay for them, there are none of these money transfers after the purchase, although the value of your account certainly fluctuates as the value of the puts fluctuates. All of the above ways to obtain negative deltas cause pressure on the value of the stock similar to how straight sales of long stock puts pressure on the price of the stock..." Continued via the link above which is well worth the read. All things considered, we are ultimately talking about derivatives and derivatives of derivatives.
- ShabbosGoy 9y agoI’m curious as to how they’re planning on tracking price of the underlying (in this case BTC itself). Could be a great opportunity to arbitrage based off of price desync across exchanges.
- sheeshkebab 9y agoI wonder how long before bitcoin gets banned by us gov completely (or at least conversion to/from usd by us banks). It seems like this thing is ripe to create either some systemic financial crisis or help governments of countries that are not exactly allied with us interests (china, dprk etc).
- burger_moon 9y agoGiven that this article is about a regulated US exchange introducing trading for btc, I'd say chances of US outlawing it are slim. Possibly more regulation around it, but outright banning, not likely.
- uncoder0 9y agoCouldn't someone just publish a print version of the source code and whitepaper and it'd fall under the First Amendment? I believe this was done for PGP https://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_investigation https://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_i...
- elif 9y agoYou can publish a book on how to grow marijuana. They can still make using the book illegal. They can even make using PGP illegal, and there are politicians trying.
- mancerayder 9y agoHuh? There are all sorts of such literature available legally. The US government does not (in 2017 at least) ban these things. Unless you have a recent example?
- elif 9y agoMy point is that while the literature is available, implementing its content is still a controlled action. For a reference, I mentioned your example of PGP, which would be made illegal to use under this proposed law https://www.scribd.com/doc/307378123/Burr-Encryption-Bill-Discussion-Draft https://www.scribd.com/doc/307378123/Burr-Encryption-Bill-Di...
- cs702 9y agoWith every passing year, more and more financial products and services are being created around Bitcoin: futures, ETFs, swaps, and so on. These products built on each other: the ability to hedge with futures will enable the creation of additional Bitcoin products and services, entangled with each other in complicated financial networks. Regardless of what you think about it, Bitcoin is slowly but surely becoming a PERMANENT component of the world's financial infrastructure. It's not difficult to imagine a future in which having some kind of Bitcoin exposure in a portfolio becomes conventional wisdom.
- debt 9y agoThat seems dangerous akin to ‘08. Crypto in general isn’t being used for much relative to its current hypothetical value. It’s being propped up by a few huge investors. Once those investors have tripled their investment and grown bored speculating, they’ll move on, and there’ll be a run on crypto driving its value through the floor. So any exposure through retirement accounts or other investment products seems really dangerous. But idk
- pilsetnieks 9y ago> Once those investors have tripled their investment and grown bored speculating Can you point out to any example in history where an institutional investor has gotten out of investing because they have grown bored, and the profits they have are enough for them?
- debt 9y agono but I imagine large funds change investments many times over their lifetime particularly in its riskier allocations. funds are usually made up of larger contributors so while idk of an investor that’s grown bored there are plenty of examples of funds offloading investments for other financial products
- chairmanmow 9y agoGreater fool theory in action. Let's not take a moment to step back and think about this, because hey it's going up! If I'm positive it's a pyramid scam, why should I put my money into it?
- scurvy 9y agoOne thing this does is create preferential tax treatment for short term bitcoin trades. These are section 1256 contracts, so instant 60/40 tax split, vs 100% real income tax. You'll see some institutions move away from the BTC/USD market for this reason.
- rkagerer 9y agoMy thoughts on Bitcoin futures at CBOE and CME: - Unlike LedgerX, the futures will settle in cash, NOT in Bitcoin. So they won't directly create demand for more Bitcoin. - In effect this is a "bookie pool" for institutions to place side-bets on bitcoin. Although there might be some consumer participation - I reached out to several CME brokers and at least two of them, NinjaTrader (US) and RBC (Canada), intend to provide the futures product to their retail investors (pending internal review). - Biggest customers will probably be institutions who want to short (bet against) Bitcoin, and those who want to establish a long position (bet in favor of it) but are prevented from buying bitcoin directly (due to regulations, security / handling concerns, etc). You would think the CME trade throttling rules in particular would make buying the asset directly a more attractive option for those who want to go long and have access to other marketplaces (i.e. existing exchanges). For that reason, after the initial "rush" to get in, I think there's a risk the CBOE and CME markets will tend to attract more "shorters" than "longers". - Naked shorts (placing short orders for assets you don't have and don't intend to buy) are an interesting aspect which I don't fully understand. I think the practice is illegal in US securities, although one of the exchanges from which the CME price index will be derived (Kraken) apparently already allows naked shorts (surprised that didn't catch the eye of regulators). - A lot of the money in Bitcoin today is retail. Are those folks ideological, or easily spooked? (Probably a mix). What happens if folks start seeing red futures around the corner? Is there a risk the futures indices (with their more-disciplined institutional money) will start leading (rather than following) the Bitcoin price? While I'm excited by this development (obviously a lot of great PR) I'm concerned there might be risk of it backfiring compared to the overly optimistic expectations I've been reading from existing Bitcoin holders. I really do hope it paves the way to ETF's (where you actually buy a basket of Bitcoin) - something I'd be a lot more excited for. In the meantime, here's hoping my cautious skepticism is unwarranted. There's some good discussion over at Quora: https://www.quora.com/How-will-futures-trading-on-CME-affect-the-Bitcoin-price https://www.quora.com/How-will-futures-trading-on-CME-affect...
- banderman 9y agoI like how everyone has moved on to ignoring the fact that 5-10% of all Bitcoin are controlled by an unknown party. Would this be acceptable in any other currency? https://bitslog.wordpress.com/2013/04/17/the-well-deserved-fortune-of-satoshi-nakamoto/ https://bitslog.wordpress.com/2013/04/17/the-well-deserved-f...
- nowherecat 9y agoI was just saying this to someone. ~4% Control ~95% of all bitcoin. Could anyone explain to me how this is acceptable? Why buy a currency that is worthless without electricity and where the wealth is so unevenly distributed? I’m curious. To me that’s already two good reasons to stay away. Am I missing something?
- monort 9y agoWould you use a currency where 10% every year (not once) goes to a relatively small number of banks? USD M2: https://tradingeconomics.com/united-states/money-supply-m2 https://tradingeconomics.com/united-states/money-supply-m2
- kpga 9y agoA lot of money has been made on the way up. And a lot of money has to be made on the way down. But for that, some more pumping is needed. HODL.
- magicfoxs 9y agoAgree, futures volumes need to be massive for short manipulation to be viable
- jes5199 9y agoit has recently come to my attention that Darknet vendors now prefer Monero over Bitcoin - it's more anonymous, and transactions are (currently) faster. I don't know if that means anything long-term, but Darknet was the first place that had a lot of Bitcoin adoption. It's currently very difficult to buy Monero with cash, typically you buy Bitcoin and exchange it for Monero on a secondary exchange.
- jeff7289perrin 9y agoI am wondering if anyone has been in contact with a brokerage that is going to list the Cboe futures when then 'go live' on Sunday. I haven't spoken with one that hasn't said 'we'll wait and see'.