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That'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
by rb808 9y ago
That'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.
- solotronics 9y agothe cash settled futures market is more like you betting your neighbor $100 that the price of BTC will rise by a certain date. the futures exchange acts as the bookie and just exists to track the BTC price on the crypo exchanges and settle the futures contracts ( bets ).
- kgwgk 9y agoBut the bet is open to anyone and, as the parent said, if the future is much cheaper than the real thing the people who want to get exposure may use the future (removing demand from BTC) and if the future is much more expensive arbitrageurs will sell futures and buy BTC at the same time (adding demand).