Bitcoin Forum

With Bakkt Futures launch, I see many people here on the forum asking what is a future, or simply getting the concept wrong, or again, confusing concepts and exchanging terms.
I will try in this thread to clarify a few points, trying to make things as simple as possible, and taking an example of real cases, using BAKKT and CME bitcoin futures when possible, or other examples.

Futures are financial contracts obligating the buyer (the seller) to purchase (to sell) an asset (called "underlying asset"), such as a physical commodity or a financial instrument, at a predetermined future date and price.

Let's see an example:

https://talkimg.com/images/2023/05/16/blob1db63d1244512a71.jpeg

If I buy a BAKKT future at 7,942.5, means that on contract expiry, on Oct, 17th 2019, I have an obligation to buy a single bitcoin from Bakkt Warehouse at the price of USD 7,942.5. The actual delivery of the future will be performed the following day Oct, 18th 2019. I can trade this future until Oct, 16th 2019.

Similarly, if I sell a BAKKT future at 7,942.5, means that on contract expiry, on Oct, 17th 2019, I have an obligation to sell a single bitcoin from Bakkt Warehouse at the price of USD 7,942.5.

The following image details all the relevant dates for a future:

https://talkimg.com/images/2023/05/16/blobe05c30fab9fee62e.jpeg

• FTD (First Trade Date): initial date available for trading the future contract.
• LTD (Last Trade Date): final date available for trading the future contract.
• FND (First Notice Day (https://www.investopedia.com/terms/f/firstnoticeday.asp)): first date when the exchange can inform the holder of a long future position of the delivery of the underlying asset (Bitcoin in this case), it is the first date also when the exchange can inform the short holder he has to deliver the underlying to the point of delivery.
• LND (Last Notice Date): it is the last date when the exchange can order perform the actions detailed above.
• FDD (First Delivery Date (https://www.investopedia.com/terms/d/deliverydate.asp)): first date when the exchange can actually transfer to the the long future position the property of the underlying asset at the delivery point (in this case the Bitcoin at the BAKKT Warehouse).
• LDD (Last Delivery Date (https://www.investopedia.com/terms/d/deliverydate.asp)): similarly it's the last date when the exchange can actually transfer to the long future position the property of the underlying asset at the delivery point (in this case the Bitcoin at the BAKKT Warehouse). Once again in this case FDD and LDD coincide.
• FSD (Final Settlement Date (https://www.investopedia.com/terms/s/settlementdate.asp)): it's the final date when payments are made between the future position holder and the exchange.

Futures contracts detail the quality and quantity and the point of delivery of the underlying asset; they are necessarily standardized as they are traded on an exchange. It is of an utter importance that the asset physically traded at the end of the future is of a given quantity and quality. It might be easy for a financial instrument while this is a huge constrain for physical commodities. Think of AAPL shares are all equals, while a barrel of oil can be very different regarding many qualities.

For example, the WTI future at the CME details the underlying asset in with the following definition found in the contract specification (https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html?ds_medium=cpc&gclid=Cj0KCQjww7HsBRDkARIsAARsIT5ag7FeLArBEeynwy1XCiuOB9MT2zqD2HeTuW2k79Z5j9B5y2NsTikaAm_jEALw_wcB&gclsrc=aw.ds):


You see that detailing the quality of a barrel of oil is way much more complicated than detailing the underlying asset of the BAKKT future:


Here we have a difference with CME future.
While one future contract in BAKKT controls 1 Bitcoin, 1 future on CME controls 5 bitcoins:


So while BAKKT future has a nominal value of around USD 8,000, CME future has a notional value of 5*USD 8,000 = USD 40,000

Also contract size influences minimum price movement: the lower the contract value, the lower the minimum price movement (tick value):

BAKKT

CME:
This means that BAKKT contract can move from 8,000 to 8,002.5, meaning the holder of a contract gains 2.5 USD, while CME future can move from 8,000 to 8,005, meaning the holder of a contract gains 25 USD.


It is not compulsory to actually deliver the underlying assets.

A first differentiation between futures is the one between physically settled versus cash settled:

According to Wikipedia (https://en.wikipedia.org/wiki/Futures_contract) (minor edits for clarity)


Here comes the first innovation of BAKKT futures, which are physically settled, an actual bitcoin is delivered to the buyer of the future; CME futures instead are cash settled, meaning at the end of the future the dollar equivalent of a Bitcoin is paid to the holder of the future.

Regarding the point of delivery, WTI is again much more complicated than Bitcoin.

WTI (https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html?ds_medium=cpc&gclid=Cj0KCQjww7HsBRDkARIsAARsIT5ag7FeLArBEeynwy1XCiuOB9MT2zqD2HeTuW2k79Z5j9B5y2NsTikaAm_jEALw_wcB&gclsrc=aw.ds):

BAKKT (https://www.theice.com/products/72035464/Bakkt-Bitcoin-USD-Monthly-Futures-Contract):


Pretty simple then. BAKKT is actually providing clients with a warehouse (basically, a wallet) where they can deposit their bitcoin to be traded against their future.

In real markets, the actual delivery rate of the underlying goods specified in futures contracts is very low: only few of the traded futures get ever settled, physically or financially. Most futures positions are actually closed, or exited before the actual expiry of the future, performing an opposite action: buyers (sellers) of the future sell (buy) an equivalent quantity of the same future contract offsetting their position toward the exchange, effectively exiting your position without taking the delivery of the future.

This lead to another concept in future: open interest and volume.
Again from Wikipedia (https://en.wikipedia.org/wiki/Open_interest#targetText=Open%20interest%20(also%20known%20as,there%20must%20be%20a%20seller.):

Volume instead is quite a straightforward definition (https://www.investopedia.com/terms/v/volume.asp):


Let's see an example:

• A sells a future to B: Total volume is 1, open interest is 1
• C sells a future to B: Total volume is 2, open interest is 2
• D sells a future to A: Total volume is 3, open interest is 2

In the last trade A closed his position, who was "passed" to D: hence the total positions open on the market is unchanged to 2: B is long 2 contracts, C and D are short 1 each.

• B sells a future to C: Total volume is 4, open interest is 1
• B sells a future to D: Total volume is 5, open interest is 0

After those 5 trades (volume= 5), there is no more open interest, all positions on the future are closed, everyone is flat, no final settlement happens at the exchange.

On BAKKT we get informations on Volumes only, not open interest (UPDATE: Open Interest figures are now available via Bloomberg Terminal see this update (https://bitcointalk.org/index.php?topic=5188060.msg52997780#msg52997780)).

https://talkimg.com/images/2023/05/16/blob1db63d1244512a71.jpeg


On the 25th of September 131 contracts were traded, but we don't know anything on how open interest changed.

On the CME we get both informations: (https://www.cmegroup.com/trading/equity-index/us-index/bitcoin_quotes_volume_voi.html?optid=8478#tradeDate=20190925)

https://talkimg.com/images/2023/05/16/blob229470046f8e53ad.jpeg


On the 25th of September 5,824 contracts were traded on the September expiry, there are a total of 1172 contracts open, 737 less than yesterday close (actually OI are not updated on real times, so both those figures relate to one day before, but you get the concept). This means there are 737 contract less than previous close “live” on the market, potentially deliverable at future maturity.



Futures can be used to hedge or speculate on the price movement of the underlying asset.

For example, a bitcoin sensitive business (think of a miner) could use the future to reduce her profit dependency on bitcoin prices movements, locking in a certain level of price, thus reducing risks, selling an appropriate quantity of bitcoin futures.
In case of bitcoin prices going up, profit on mining would go up, but that would be countered by a loss on the bitcoin future, thus erasing the economic impact of such price movement of the underlying assets.
In the opposite scenario, a decrease of the bitcoin price would translate in less profits coming the mining operations, but the short position of on the future would cause a similar size profit.
In both scenarios then the final profit of the miner, the sum of mining operation plus the profit/loss from the future positions, would be unaffected.
This process is called hedging: the purpose of hedging is not to gain from favorable price movements in the underlying assets, the bitcoin in this example, but prevent losses from unfavorable price movements and maintain a predetermined financial result: the miner actually hedged herself from bitcoin price movements attaining the same level of profitability with any bitcoin price scenario. Of course it forfeited gains in case of bitcoin price increases, but protected herself from a scenario of reduced prices that could potentially end the mining operation in the first place.


The second main use for Future contract is speculation.
To speculate means profiting on the future position from movements in the prices of the underlying asset.
If a market participant wants to speculate on an increase in the price of the underlying asset in the future, he could gain by purchasing a futures contract and selling it later at a higher price on the future market or profiting from the favorable price difference versus the spot market once the future has settled (taking delivering of the underlying asset after the settlement of the future and selling it on the spot market).
The risk is of course is to face a loss in case of an adverse price movement, a slump in prices in this case. If the price ends up being lower than what it was when the future position was opened the holder of a long position will find himself buying the underlying at the set prices at the moment of trade inception, and selling the underlying asset at a lower price on the spot market, thus incurring in a loss.
On the opposite, he who wants to profit from a lower price, should sell the future, effectively gaining from buying at a lower price to settle the future selling it at a previously determined higher price to the holder of the long position of the future.


Let’s look at the futures currently quoted at the CME:
According to CME the following Contracts must be Quoted:

Listed Contracts

Quarterly contracts (Mar, Jun, Sep, Dec) listed for 2 consecutive quarters and the nearest 2 serial months.

In fact the quoted contracts are the following:

FUTURE	MONTH	LAST TRADE DATE	PRICE	OPEN INTEREST
BTCV9	Oct-19	25/10/2019	8275	2142
BTCX9	Nov-19	29/11/2019	8290	248
BTCZ9	Dec-19	27/12/2019	8360	943
BTCH0	Mar-20	27/03/2020	0	0

                              


September expiry has just expired at the moment of writing so the two main cycles expiries are DEC 19 and MAR 20 (just quoted, not traded yet), while the serial ones are OCT 19 and NOV 19.
We note that the bigger open interest is on the front contract, while the serial contract has little interest, and the last serial contract is too new to have any open interest (it has been quoted only since a few hours).

If we look at the prices we see those are rising: the calendar spread (the difference between prices on different expiries) is positive.
One should think that this is some kind of “market expectations of rising bitcoin prices” between today and December.
Well, this is wrong!
The best expectation for the price in the future is the spot price, as it incorporates all the public information set available to price also future prices. If I had the certainty of a rise in bitcoin price in one year, or if I simply had a rational expectation on this, I could simply buy bitcoin, making the price rise, and hence moving the spot price closer to the future price. This is, with some oversimplification, a non arbitrage conditions linking pricing of a same asset in different times.
The future price should always be something like that:


Let’s see what does it mean:

Spot price: as we have seen the best estimate for a future price is the spot price, because all the public informations about the future are already discounted in market price (semi-strong market efficiency (https://en.wikipedia.org/wiki/Efficient-market_hypothesishttps://en.wikipedia.org/wiki/Efficient-market_hypothesis) à la Fama (https://en.wikipedia.org/wiki/Eugene_Fama)).
Funding Costs: are represented by the parte (1+ risk free rate): buying a bitcoin and trading future require financing the position. Low interest rates globally tended to subdue the importance of this factor, which should be a cost and hence tends to increase the future prices.
Cost of carry: or the cost holding bitcoin until the future maturity, this is what mainly influences the slope of the future prices being upward or downward sloping. Cost of carry is the cost for storing a Bitcoin. It might be low for Bitcoin compared to other future underlying assets (think of storing a bitcoin instead of storing a gold bullion, or a barrel of oil), but alas, insurance costs and storage at an industrial level cannot be neglected. To sum up, if I incur into a cost to store my underlying asset, this mean that the future price I want to sell this asset will be higher than spot, to compensate for that such costs, hence driving future price up.
The convenience yield is the value of having the availability of use of the underlying asset until future maturity. It is particularly relevant for financial asset, representing the coupon or dividend paid from spot date until future maturity. It can be thought like a negative cost of storage, a sort of “income for storage”, or profit coming from holding the asset itself. In case of bitcoin the convenience yield could potentially come from earnt interest coming from lending my Bitcoin to an exchange or a third party (think of BlockFI): If I earn an interest lending my bitcoin to BlockFi I can I will be willing to buy them spot and sell them in the future below current market price, if the difference is more than compensated by interests earned.

The reason why future prices exhibit a positive (or negative) sloping shape has to do with the cost of carry of the position versus the convenience yield: if the convenience yield is lower than cost of carry, think of any physical commodity, then the future curve will exhibit a contango, while if the convenience yield is higher than cost of storage (this is true in many financial asset future) then the future price slope will be characterized by a backwardation.
The shape of the curve can also vary over time: while it is on contango today, it hasn’t always been like this as it was in backwardation at the timing of CME/CBOE future launch (https://www.newsbtc.com/2019/01/16/etoro-market-update-bitcoin-in-backwardation-this-is-fine/). It’s always worth a think considering which forces are driving the slope of the curve in a sort of “Mixed nature” underlying like bitcoin.


Every exchange has a "commitment of traders" report, where you can get insight on the positioning of players on the exchange.
The commitment of traders report for Bitcoin Futures at CME (the only relevant one for the moment) can be found at the following link (https://www.cmegroup.com/tools-information/quikstrike/commitment-of-traders-agricultural.html) and selecting Equity Indexes, then Cryptocurrencies and finally Bitcoin as Underlying:

https://talkimg.com/images/2023/05/16/blobb96052e8793e73d4.jpeg

I strongly recommend you to read the User Guide (https://www.cmegroup.com/tools-information/quikstrike/quikstrike-cftc-commitment-of-traders-report-user-guide.html) detailing all the technicalities of how this chart is made, but here I will tell you the main thing:

of course the total open long positions are equal to short positions, if looking at an aggregate quantities: Open Interest is equal to the sum of Longs (or Shorts) + Spread positions.
This is clearer if we look at a breakdown by table:

https://talkimg.com/images/2023/05/16/blobc5cf7eb021e9535b.jpeg

of course different type of player have different approach to trading, so knowing if they are long or short can be somewhat useful.

Even more interesting is studying the evolution of long/short balance , Volume and Open Interest: this can give us an hint on how the positioning of players is influencing the price action.

• BAKKT Futures Contract Specifications (https://www.theice.com/products/72035464/Bakkt-Bitcoin-USD-Monthly-Futures-Contract/specs)
• CME Bitcoin Futures Contract Specs (https://www.cmegroup.com/trading/equity-index/us-index/bitcoin_contract_specifications.html)

Another resource i strongly support is the following this course by CME:

INTRODUCTION TO FUTURES: Definition of a Futures Contract (https://www.cmegroup.com/education/courses/introduction-to-futures/definition-of-a-futures-contract.html)

That is actually a very complete course on futures, providing very useful information on futures definitions, uses, and all the implementation details at CME. Definitely worth a read.


This post is only an initial version and covering only a few topics.
I can go in deeper details or cover additional topics.

For sure a few topics I want to explain in greater details:

• Term structure (contango/backwardation)
• Margins on the open positions (Initial margins/Variation margins/Marking to Market)
• Commitments of traders example

I am by the way open to your suggestions to improve the thread. Let me know how to improve this post.

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This post is eligible for my project:



If you think you can help here, just visit the thread!

Russian Translation by FontSeli (https://bitcointalk.org/index.php?action=profile;u=2221613): Bce, чтo вы xoтeли бы знaть o фьючepcax нa BTC (https://bitcointalk.org/index.php?topic=5205822.0)

Good thread, even though this isn't exactly Beginner material. No beginner should be trying futures just yet. They'd do better to learn more about the underlying tech, or buying directly from either an exchange or some other trusted individual or company OTC or P2P.

If you think there's a more appropriate section for this thread, please make a proposal.
I understand what you mean, but this thread is meant to make everyone understand the mechanics of a future contract, it is not a financial advice.
Probably adding a little disclaimer on the first post then.
I will detail also how leverage on the future works, explaining why these are highly speculative instruments.

Merit worthy thread, I've always been confused by futures and how they tie in to shorting and this makes it pretty clear.

It might be better suited in the same section I had my thread regarding bakkt before it officially launched:
https://bitcointalk.org/index.php?topic=5186550

It got the most exposure for those who frequent the forums. Due to I almost didn't see your thread since I rarely check the beginners section and wouldn't think of advanced material should be a topic someone who is new to the forums and crypto in general would comprehend more or less be interested in to start of on.

I was not aware of this (bolded)!

Thanks for the in depth explanation of the workings of these different systems.

Now would you like to tackle and add the options on futures on cme?

https://www.cmegroup.com/education/courses/options-on-futures-for-equity-traders/why-options-on-futures-gives-added-benefit-of-diversifying-risk.html

Options are a much more complicated issue.
Lot of advanced math on these. Or even without math, if I try to explain “intuitively” lot of stuff to discuss.
I can try, once I have finished this, if I have enough supporter on this issue.
Let me know!

Hull Trading Company (https://en.wikipedia.org/wiki/Hull_Trading_Company) (acquired by Goldman Sachs in 1999) was very successful in trading with Options. very interesting topic too.

The Wall Street Code - VPRO documentary - 2013 (https://youtu.be/kFQJNeQDDHA)

EDIT: follow up with an other good video about the Flash Crash 2010 - VPRO documentary - 2011 (https://youtu.be/aq1Ln1UCoEU) (had the "pleasure" to experience this event in may 2010 with a huge open position in EUR/USD as a Newbie ::) )

EDIT2: Quants - The Alchemists of Wall Street - VPRO documentary (https://youtu.be/ed2FWNWwE3I)

^^^--- Thx guys IOU both sM+

Maybe you should combine your efforts and make a guide for Regular Bitcoiners to understand the impact these new movers are and will be having on the markets..


Fucking h8 goldman Ballsacks!

EdiT:


This is a great video!

I don't understand why you said nothing about the CoT (Commitments of Traders) ? It's very important in futures markets.

I said it is still work in progress.
I will add this when I have described the more important things I have detailed in the OP.
Adding to the list though.

it looks like it will become a full time job  ;D  take your time Buddy! all with some brain will be patient.

btw, my "thank you" post got deleted by "Moderator: MiningBuddy".  ::)  unfortunately don't feel happy with Thermos private playground anymore and working on something for real Quants.

Alright. I'm waiting patiently. I've been wanting to know and understand what futures contracts mean. I always hear about CME futures opening and expiry without having even the slightest idea about it. But thanks to your thread, I've gotten to know a thing or two. I'll be on the lookout for when you add new content.

Exactly.
This is a beginner section posts, and books have been written of futures, and careers have been built on them. So I eventually have to draw a line on the sand!
I don’t know how to do if I will ever dare into writing a similar post on options.

It is helpful if you can add a section that guides on how to get expired days of Bitcoin futures on different platforms, CME, CBEO, Bakkt. I do believe that Exprired days of Bitcoin future contracts have very big impacts on bitcoin price around those days. Price can move upwards or downwards considerably around expired days.

Honestly, I have still not known how to get Bitcoin future contract's expired days. I much appreciate if you or anyone else can help.

Expiry dates are easy to find on the description of the contract:

CME:

So with a simple calendar of with some excel sorcery you can easily find why you are looking for.
Tomorrow I will anyway provide you with a list of all the past expiries.

EDIT:  here you go:

Ticker	Month	Last Trade	First Notice	First Delivery	Last Delivery
BTCX8	Nov 18	30/11/2018	30/11/2018	30/11/2018	30/11/2018
BTCZ8	Dec 18	28/12/2018	28/12/2018	28/12/2018	28/12/2018
BTCF9	Jan 19	25/01/2019	25/01/2019	25/01/2019	25/01/2019
BTCG9	Feb 19	22/02/2019	22/02/2019	22/02/2019	22/02/2019
BTCH9	Mar 19	29/03/2019	29/03/2019	29/03/2019	29/03/2019
BTCJ9	Apr 19	26/04/2019	26/04/2019	26/04/2019	26/04/2019
BTCK9	May 19	31/05/2019	31/05/2019	31/05/2019	31/05/2019
BTCM9	Jun 19	28/06/2019	28/06/2019	28/06/2019	28/06/2019
BTCN9	Jul 19	26/07/2019	26/07/2019	26/07/2019	26/07/2019
BTCQ9	Aug 19	30/08/2019	30/08/2019	30/08/2019	30/08/2019
BTCU9	Sep 19	27/09/2019	27/09/2019	27/09/2019	27/09/2019
BTCV9	Oct 19	25/10/2019	25/10/2019	25/10/2019	25/10/2019
BTCX9	Nov 19	29/11/2019	29/11/2019	29/11/2019	29/11/2019
BTCZ9	Dec 19	27/12/2019	27/12/2019	27/12/2019	27/12/2019
BTCH0	Mar 20	27/03/2020	27/03/2020	27/03/2020	27/03/2020

                                    
                                 

Bitcoin is possibly more fungible then oil is an idea from reading that though I think oil when an oil oil field is established is then quite consistent in its quality and exchangeable as a barrel with most oil of that type.   Venezuela has this problem of oil which does not qualify for sale without refinement, that little detail has made them poorer sadly.


Are they really obligated to buy, if BTC goes to $1 then the contract expires worthless surely.   It doesnt then become a liability where I owe 7491 in difference from the asset to what I promised to pay.   Or is that options Im thinking of.

You are obliged to pay.
You actually have already have already paid it, as the exchange doesn’t wait until last day to ask you 7,941 USD: he rather ask you to cover the margins daily.
This is something I am going to detail in one of the next improvement of the OP post.

Please use your hands (or feet), regardless of your nicknames  8)

OMG, im shocked, really its walls of text to explain one way of investing? I mean why there is need to create such complex ways of investing in Bitcoin world?
Buying is best investment, why complicate things? Often its to confuse less bright or people less beign able to manage their funds, to make them make wrong decisions and loose money.
I really don't like complicated instruments of investment, banks love to create them to steal money from customers over and over. Its really sad how many people falling for that.

Not everyone can buy and hold bitcoin.
Institutional money need a “walled garden” to manage their positions because of regulatory/compliance/auditing constraints.
All those constrain don’t mean anything for Bitcoin, let alone for you!

They need to own the rules so they can game the system. :)

Can you also explain why the investors prefer cash settled futures and not asset settled futures like the offering from Bakkt? I think this is one of the main reasons why other cash settled futures did much better than Bakkt.

Also, do you think institutional investors will eventually come around to investing more into Bakkt with it's asset settled futures or will they shy away from it?

What time frame are we talking about for investors to understand what the Bitcoin asset is, compared to other physical asset futures that are on offer? <Do you think investors are wary to invest in something they cannot visualize or are they scared of manipulation and Bitcoin's volatility?>  ???

I prefer cash settled futures when I am shorting an asset.  I don’t want to be paid in the asset when the value of the asset is falling, I want to be paid in cash.

Regarding Bitcoin futures the main difference is custody.
For the vast majority of future subscribers the holding of a "physical bitcoin", is simply impossible, being it too complicated from a regulatory/compliance point of view and often beyond investment mandate. This is why CME launched cash settled futures first: this product perfectly integrate in the post trading workflow of any given future investor. Also future investors never get in "touch" with actual bitcoins, saving them from a lot of troubles when investing.

This is also why BAKKT future is so important: this means that bitcoin is not a financially valuable assets, but an asset that has some properties valuable beyond the price dynamic.
 

There my friend.
I just added a paragraph detailing how to properly read a CoT report.

BLOCK TRADE:  (https://www.investopedia.com/terms/b/blocktrade.asp#targetText=A%20block%20trade%20is%20the,impact%20on%20the%20security%20price.)



So basically, it's some sort of "pre-arranged" trade between two counterparties who decide not to trad this in the open market, because it would have caused price disruption due to poor liquidity. This trade so is arranged and then it goes through the market infrastructure.

After I have read the OP and later all comments in this thread my first thought about the proper section for such a detailed article was the Economics board (https://bitcointalk.org/index.php?board=7.0).

There are already a couple of threads about Bakkt just like this one quoted above. I am sure this very detailed article is too overwhelming for beginners and even more, advanced traders have to read it a couple of times to understand the BTC futures subject correctly. One has to have already a lot of trading experience with multiple BTC products to understand all these technical details.

I just want to add that this is the best explanation of BTC futures I have read on Bitcointalk so far. I really have a lot of respect for the author's knowledge.

Ok, understood, thanks for your feedback.
Due to your inputs, I am going to move this thread in the Economics Board then.
Hopefully that board is more suited to this post and beginners will eventually find their way to this thread.
 

This is it. Thank you OP for your initiative and effort in putting up such a long and sophisticated explanation of the overhyped Bakkt futures exchange. A lot of members are definitely hungry of this explanation, not just newbies for sure but also those with higher ranks, as high as legendary. Take note that high rank members are more afraid and shy to ask questions than newbies. And since you've read our minds, this thread is begotten.

The term "futures" is one of the most important keyword here and you've clearly explained it. Great job!

Fantastic summary, fillippone.  Before becoming interested in crypto I was extremely interested in the stock market and so was familiar with options, futures, and other derivatives.  But I much preferred buying individual stocks outright instead of just betting on price movements, which is what futures are basically all about. 

Futures also don't provide any income through dividends or any other benefits an investor gets by stock ownership.  Its important that new traders realize this.  Hedge funds and the rest of wall street use derivatives to hedge their positions, but I think its difficult for the average individual trader to make money with them (I could be mistaken, tho).

This all makes me wonder if any wall st firms are really getting into bitcoin by utilizing Bakkt.  Reports around here seem to suggest that this isnt the case, but somehow I can't imagine investment firms not wanting to make money with crypto.  When its hot, its hot and there's a lot of money to be made.  Bet you when bitcoin starts accelerating toward $20,000 and past that to a new all time high, volume on Bakkt will explode.

Bitcoin is legal in the US and never has been banned in China.
Please don’t spam this thread as we are all trying to learn things, not earn a few Satoshi per post.
Thank you.

Extremely informative read.

My only real query that I'm still baffled by is that why anecdotally, BTC futures only exists in contango and never really in backwardation? Given the fact that there isn't really much of a cost of carrying BTC (you can just chuck it in a cold wallet and forget about it until maturity), is it solely due to market expectations of BTC price?

Dabs is right though, this ain't beginner stuff, but it's what intermediate traders desperately need to read even if they're just trading perps, imo.

This is an interesting question.
As I wrote in the OP at launch of CBOT futures the term structure was in contango.  Of course the interpretation of this being a "forecast" of future prices is totally wrong, as I have explained.
Term structure shape is definitely something to look after.

Speaking of Commitments of traders.
There are many informative websites that periodically update and do analysis on this official document.
One of this is www.skew.com


This is the total Volume and Open Interest chart over the past weeks:

https://talkimg.com/images/2023/05/16/bloba13b7da2ae9de02e.png

This is the current Open Interest broken down to individual investor category

https://talkimg.com/images/2023/05/16/blob2f70bacd5efc706e.jpeg

This is the change in Open Interest broken down to individual investor category

https://talkimg.com/images/2023/05/16/blob87f0a19c71f3e3a3.jpeg

We see the open interest is now around 16,500 lots, with a weekly variation of -4,150 (down 20%).
The category that reduced the most the open interest is the leverage short. So they bought back some short they opened.
This can be interpreted in two ways:

• BULLISH: the short closed their positions, the selling pressure has ended and there's now space for a rebound. 
• BEARISH: the short reached their target, so they are not willing to buy the market in case of another leg down. Without buyer next leg down hence next movemement down could be bigger.

It is not weird to be afraid of bitcoins price, everyone should be afraid of the price at all times when it is low or high, it is not the part where you are afraid you should be worried about it should be the lack of bravery when going into bitcoin, bravery is not the state of "not being afraid of anything", no, bravery is being afraid of something but doing it anyway because you want to, that is when you are brave and if you are not brave in bitcoin market then I am afraid you will never make money.

You should be afraid and you should accept the fact that you will never know what the price of bitcoin will do and still invest anyway no matter what. Those type of people do lose money sometimes but they are also the ones who make the most profit out of crypto trading.

Bloomberg added BAKKT to their Professional service Bloomberg terminal.

From here you can observe Open Interest, an information that is not widely available until now, as far as I know:
 
https://talkimg.com/images/2023/05/16/blobb3ace13a191402a6.jpeg?1


We see the rise in the volumes we observed in the last 10 days, probably due to more FCM (Full clearing members) onboarding in their warehouse, also was accompanied by a rise in the open interest.
72 lots of open interest might not look huge, compared to trading volumes, but probably is natural for a startup phase and due to the high volatility of underlying.

Again on Bakkt Open interest.
They are now widely available at skew.com

https://talkimg.com/images/2023/05/16/blob667bdc173c0ed540.jpeg

A few days ago PlanB made the following statement.
https://twitter.com/100trillionUSD/status/1191293123298832386?s=20


What does it means?
Is it really possible to profit from this situation?

Let's proceed in order and see what the facts are, concentrating only on BAkkt, for the sake of simplicity and because more similar to thread analysiss, but the reasoning is the same for every other future 

From the Bakkt website we gather the information on the prices of the futures currently traded.

https://talkimg.com/images/2023/05/16/blobd860cd3e26c604c2.jpeg

I carefully selected a time where the last contract, the less liquid has the same timestamp of the first, so we have some reliable quotation for the examples. Others contract have a slightly different timestamps, so the calculation won't be actually very reliable, but it is something we must cope with until liquidity is good on all the instruments.

At the time of trading the Spot price, (I used the CME Real Time Index (https://www.cmegroup.com/trading/cryptocurrency-indices/cf-bitcoin-reference-rate.html), it's the bitcoin priced used by CME futures) was trading at $ 9,310.

So the situation was the following one:

               

or graphically:

https://talkimg.com/images/2023/05/16/blobd3284129f0fc27e7.png

We can see the future term structure exhibit a nice upward slowing curve: that is a contango: as explained in the op that is the situation when future price are above the forward price.

So the idea is to profit from this situation selling a future, while at the same time buying a bitcoin on the spot market, to be held it until future expiry.
In this way at the expiry you will have a bitcoin to be sold to your conterpart. Having bought the bitcoin at a lower price, you are actualy locking in the price difference you executed your trades.

Let's see in the details

Buy 1 BTC SPOT@9,310 USD
Sell 1 BTC MAR20 Future @9,610 USD

On 20 March 20 you will have to sell your Bitcoin to you counterpart at 9,610 USD. Having bought that bitcoin at 9,310 USD, wou are actually cashing in 300 USD as a pofit.
300 USD profit on a 9,610 investment, is 2,70% return. a 2,70% return over 135 days is roughly 8,70 on a yearly basis.

This is pretty consistent with PlanB numbers.

Please note that:

• This is a market neutral strategy: you are not exposed to market risks, bitcoin can go up to 30,000 USD or crash to 1,000 SUD and your profit will stay the same, as you are buying and selling a bitcoin at the same time.
• We are neglecting the cost of carry: or the cost of holding a bitcoin untily trade expiry. I think this cost is pretty limited, you might considering insuring your investment, or you can even deposit your bitcoin in the BAKKT warehouse, that might charge you a cost for that.
• You are actually exposed to a credit risk versus the exchange: if the exchange defaults, you are holding a bitcoin versus nothing (in case you didn't deposit it in the warewhouse,, but this is adding another layer of complextiy not worth analysing here. Regulated exchanges are amongst the most liquid institutions in the financial markets as they carry very little risks due to margining of their positions.
• We didn't account for financing, margining and managing cash positions. Again I don't think they are goind to add much to this analyis.

Hello
How can we apply your strategy to futures on Bitmex? Because I can't trade on Bakkt.
Why futures of March are above spot price and other futures?

I don’t know the term structure on Bitmex, but the strategy is viable when there is a contango in future prices (the other way round when there is a backwardstion).
So, yes, as long as your cost of carry doesn’t erase the positive price differential, yes you can trade that.

Why are the prices so steep?
I still have no clue. Investigating this.

You're using which platform to trade futures please? Which platforms do you recommend?
I can't use Bakkt, and I think most of people can't here, so we can't apply your strategy if you don't give us a platform available to us.

You absolutely must do your own research if you're going to trade futures. Bitfinex, Bitmex, Deribit and Bybit are popular right now. Okcoin and Bitflyer for price signals, you'd have trouble signing up. But they are all crooks essentially. Also, use a vpn.

Hello thank you for your reply but I don't want to just trade futures, I already Mex. I want to apply his strategy, he says we can profit from the situation, but I would know how to do it while I can't trade on Bakkt and nobody here. So I was asking him where I can apply his strategy. Thank you.

This is not MY strategy. This strategy has been used since future has been traded on the markets.
DYOR before using real money on this if you are not sure on how these instruments work.

Yes I want to DYOR but could you give me some links for that?
Which platform do you recommend? On which platform are you trading? Do you know some platforms where I can apply this strategy?
Is there a way to apply the strategy on bitmex futures?
Thank you

Sounds to me that you are looking to lose money, get scammed or to gamble for the mere sake of it.

When members are repeatedly suggesting that you do some research, they are trying to be nice to you, which really means that you need to look around more and maybe even practice more, which also might mean to look more closely at yourself too, including how you are playing your own finances as well as how much of yourself you are planning to invest into something that you admittedly do not know but seemed rush to learn the nuts and bolts.

Many times when guys (and perhaps a gal or two) are able to make decent money in trading BTC (and the use of other financial instruments), they might suggest to you that it is easy, but the good ones will have spent a considerable amount of time practicing such trade (hopefully with low amounts) and building their own expertise, which would then involve adding more sophisticated and complicated financial instruments after having had really gotten used to the more simple instruments.

You usually will not make more money by merely employing more complicated trading instruments, unless you already know the simple instruments well and really study and practice on a personal level with those more complicated instruments (and you likely do not need to be an expert when you start because you can learn as you go, with small amounts), because the more complicated the instrument are designed to be in favor of the house, and you have to know the instrument so well that you can overcome the ways that the instruments are designed to be in favor of the house in order to be able to make money or to make a killing from such instrument(s).

By the way, I am continuously surprised regarding how many folks (members) that I run into in this space who seem to be so unsatisfied with the simple investing methods with BTC that is likely going to make a lot of people a lot of money, just as it has in the past, but there are so many people who want to accelerate such money making process by 10x or more and therefore end up missing up on the considerable great opportunities that are available with relatively straight forward BTC investing strategies involving, buying, accumulating and holding.... and if you get the BTC part down (without getting sucked into get rich quick schemes), then maybe you can take 10% of that value and start to play with other more complicated financial instruments that involve hedges: such as leverage, margins, options and/or futures.. which also can sound like investing in an alt when BTC is risky enough and already with a lot of upside potential.

Hello thank you very much for your long reply Sir. I don't want to risk my money that's why I want to apply this strategy. He says it's a totally safe strategy, it's an arbitrage.
I want to do this arbitrage but he doesn't say on which platform we can do it. I can't trade on Bakkt and nobody can trade on it here. It's very frustrating to tell people they can do a big arbitrage and then to not tell where they can do it.

I agree that if someone is saying that some arbitrage trade can be done, and if there is instant profits then it should be clarified how that can be accomplished  because sometimes arbitrage opportunities might look easy in theory but much more difficult to carry out in practice

The definition of arbitrage alone gives you your answer so that may be why people are not telling you a step by way step method for doing it. By definition if you cannot use an exchange that you are trying to arb from then you simply cannot use that method. The answer to your question is inherent in your question. And that is why JJG is telling you politly that you have no clue what your doing.

And that is why you have been told to DYOR, luckily for you I am not such a polite guy. :)

https://en.wikipedia.org/wiki/Arbitrage

Thank you very much for your link Sir it's very interesting but I wasn't asking for the meaning of arbitrage. I think you didn't understand very well what is the problem here. A strategy has been detailed by Fillippone, to safely earn money with futures. But unfortunately he chose Bakkt for his example and I can't trade on Bakkt like everybody here, so I'm asking which platform I can use to apply this futures strategy. Which exchange are you using to trade futures Sir? Is it possible to apply the strategy on this exchange? Thank you very much

wow, this article is really impressive and it gave me a better understanding of Bakkt. I keep seeing people gossip about it but I don't really understand its mechanism.
Bakkt is a futures exchange exchange, one of the very popular derivative tools. but perhaps the bitcoin derivative tool is not really good for bitcoin due to too much manipulation and players are afraid to confront those who have a lot of money. Do you agree with me that is the reason Bakkt failed?

OK, lets say that I can buy a tv for 100 dollars and also sell it for 110 dollars back to walmart(only) but that transaction would not be settled until a future date. Then that would be an arb on the tv. But lets say i could not goto walmart(for whatever reason)  then I would not be able to actually sell that item would I?

Did that make your conundrum clearer?

I hate to quote myself, but Hueristic's attempt to explain to you, crazy-joe, by use of a dictionary definition, caused me to look at the portion of fillippone's response that you quoted.  The answer is right in the quote.  He is saying that there is a price difference in one location (on the future's market) and the spot price, which means immediate profits if you have money and ability to simultaneously buy at both locations.  That means that you need an account to be able to do both at once and find some kind of advantage in such a direct and immediate profit(s).

Hey, I used to play around with arbitrage opportunities, and I would be able to do it once or twice, and still feel comfortable, but if I kept trying to make the same arbitrage profitable trade, one of my accounts would get over balanced with either too much fiat or too much BTC.  Yes, I was profitable, but my over balance in one direction or another would make me feel that it was not worth the profits that I was making, and there tended to be a reason that I could engage in such immediate profits, and that was because one of the trades was more liquid than the other and that was the reason that the price was so different that I could recognize an ability to immediately profit in place in which I already had the ability to do so.

So, likely I am getting back to just agreeing with myself and my initial response to you, which was that if you don't know what the fuck fillippone is talking about or you cannot recognize what he is saying, then you do not have enough experience or even know how to access the places for immediate profits.  You don't get to such a place for immediate profits or being able to weigh even if it is worth it for you to exercise such immediate profits unless you get yourself into various places in which you can engage in such trades, understand the basics of tradings and employing the various tools of trading.

You know the expression that defines luck as preparation meeting opportunity?  Well, preparation involves doing your own research and even setting up some systems in your own way of doing things that allows you to take advantage of the various opportunities, and surely with arbitrage opportunities, if they are real easy, they will not tend to last very long, so you already need to be in place, if you were to engage in such.  In other words, arbitrage opportunities move, but someone who is in the game and has prepared, will be able to take advantage of such opportunities, if that is what floats his/her boat.  Does not currently float my boat, because I find myself already rich and getting richer just from holding BTC and NOT playing around with it... so even arbitrage opportunities can include both risks and costs, including time spent and accounting tricks that might
not be worth it once you really weigh the whole situation by getting yourself into positions to understand.

TLDR:  DYOR, YMMV, BTFD, HODL craefully, etc   - hahahahaha.

No AFAIK you won't be able to do that on Bitmex neither on any futures exchange I know. BTC futures on bitmex aren't "vanilla", they are inverse futures like most of the BTC futures of the cryptoverse. That is to say you don't buy and sell btc futures contracts but USD futures contracts instead, and the calculations of your profits(PnL) are done on the inverse of the price.
It's not really easy to explain in layman terms but it's the same as betting on the USD price against BTC with satoshis, but the inversion is done for you.
The altcoin futures are generally vanilla but they are against btc, and they are not asset-settled like on Bakkt but cash-settled in btc. So you can't apply this method on them because you won't receive or send the assets at the expiry date but the value of those cryptos in btc at the spot market price of the day, instead. So for example, if the price of EOS is higher than your sale price(ie the entry price of your short position) you will lose money because you will virtually give the value of one EOS at the spot market price of the day and only receive the price of your sale.

Surely, I was not much aware of this issue at all, This is a good finding for this purpose and it will make sense clear that nothing is not an easy task for the future purpose within this blockchain system, it's really an appreciated task which has done and I also believe that Bakkt is not yet ready to take the challenges to the favor of Bitcoin, one of the main problems in this platform is the price volatility so Bakkt will not capable to do something regarding this issue, so thins will remain same and Bitcoin will gain more space within this system, I think until a set of regulation will be there, nothing will change in this system, so at least a policy should be established for the favor of this platform.

thanks for explaining out . im one of those users who are confuse about those term " futures " i also thought that future means the status of bakt or btc in the future but after i read this thread im now aware and educated . its still funny when i remember some old threads on the past that ask if what is the future of btc and most of the answers that i read is they say that btc will have a good future and its price will reach up to 20k to 300k usd  ,  lol  .

To anyone interested I posted a new thread, similar ot this one, about Bitcoin Options.

 Everything you wanted to know about BTC options but were afraid to ask! (https://bitcointalk.org/index.php?topic=5214418.0)

As I explained in the post, the subject is very wide, so I focused only on some aspects. Please let me know (commenting the other thread), if you are inteerested in some particular aspect I might have not well detailed.

This thread has been translated in Russian by FontSeli (https://bitcointalk.org/index.php?action=profile;u=2221613)

Bce, чтo вы xoтeли бы знaть o фьючepcax нa BTC (https://bitcointalk.org/index.php?topic=5205822.0)

If you think this thread or any other of my threads (https://bitcointalk.org/index.php?action=profile;threads;u=1852120;sa=showPosts) is worth being translated in your onw local board, please do! I will be happy to provide assistance!

What is Bakkt? In my eyes, this is very painful. We waited months for this decision. We said corporate capital will enter the market. But it didn't. The biggest move in 2019 was Binance and IEOs. It's not popular anymore. Each institution can receive bitcoin in different ways.

I understand your point, being delusional about bakkt launch is easy, and I also expected more volumes at the start.
But we have to remember that this was one of the most ambitious plan to smuggle bitcoin into traditional finance. It had to take time, and now it’s starting to grind (we still are miles away from full potential in my opinion).
Regarding Binance and IEO, I don’t know the subject enough, but in my opinion they are long term irrelevant (but again, I might be wrong here).

I want to know the future of Bitcoin like? Especially, does the third halving event in Bitcoin history in the middle of May 2020 affect anything? The supply of Bitcoin released as a mining reward was once again cut. Will halving drive the price boom of Bitcoin?

Just look at my signature and have a read:
Stock To Flow Model: Modeling Bitcoin's Value with Scarcity (https://bitcointalk.org/index.php?topic=5191012.msg52690215#msg52690215)

Marking to Market the positions, or margining, is something it is still on the to do losit of this thread.
Anyway here you get a glimpse of the problem.
I got a question form an user, and used it to clarify some point that could be easily misunderstood b non-technical people apporaching the matter:



This is a naive question, bringing me some interesting other question, I will later try to answer.

Go for the naive part: Bakkt has the Bitcoin? YES.
How do I know? Contract specification.

When you own a future, you are constantly (well, at COB) called to margin your positions. This means that when you open a position in a future you are required to post a certain amount of cash along your position. You cannot open a position if you haven’t a big enough amount of cash in a collateral cash balance at the exchange. This amount is set by the exchange to cover the daily variation of the underlying (BTC, in this case, but this mechanism is valid for any underlying). At the end of the trading day this cash  balance is adjusted to reflect the P&L of the future position: money is poured in if your future position has gone in the right direction, otherwise the exchange take from this account the daily loss (and transfer it to your counterpart). In case the residual cash balance is lower than the initial margin, you are called to refill your margins (the infamous “margin call”, or to close forced into closing the position). This means two things: firstly the exchange has no credit risk: every counterpart has a daily margining so their exposure is not too big, second the P&L is actually credited daily in the exchange, so frauds are very limited.
So, can BAKKT exit scam you? Very unlikely, as this is the opposite way this business works (also:  BAKKT and maybe CME would suffer a tremendous reputation as risk putting their own existence at risk in case of a default).

The hard part in all this reasoning: is this margining all done in BTC? As per my explanation it should. But I don’t remember anything like that in the product specification. I will check later, when real life settles a little bit.
I am going also to put this answer in my future related thread, as it is a point I would have liked to cover, but I actually didn’t.

You likely know that I already responded in the WO thread. (https://bitcointalk.org/index.php?topic=178336.msg53606369#msg53606369)  Of course, I don't mind to continue such conversation over here to the extent that you or any other member wants to continue such conversation in this thread. As you can likely see from my response, I am not exactly convinced that there might not be fractional reserve practices going on that are not really tested or even revealed unless really extreme upwards BTC price conditions that are surely possible in bitcoin. 

Of course I haven’t a clear answer.
In my opinion I see only downsides for CME and ICE to be caught playing with their customer’s money.
The main point is that this would ruin their main asset: their credibility as a top standing counterpart to trade with trillions of dollars-worth of derivatives.

I think it is not worth for them.
But it will be interesting to see how things get rolling in the next squeeze: traditional markets are not well prepared for the volatility in crypto’s.

How to get details on total orders of bitcoin future and ordered prices as well as dates of expired contracts on CME and ICE? It is important to have some picture for the future price and movements of bitcoin. Could you help me, please.

Order books are the depths of orders biddin and offering each future.
Every exchange offers this data via paying access. It’s an high frequency data, and very informative for professional player, given it’s very important to evaluate market liquidity and slippage (I.e. costs) when executing large trades.

I don’t think it’s very informative for future direction, as it is very easy to place big orders away from markets pulling them off when markets approach:,hence giving fake informations about trading intentions (albeit this would be a “slightly illegal” practice).

Appreciated your help. I implied about the filled orders, not waiting orders that can be cancelled. It is as same as tradings, data on past tradings like VPVR help us to have some strong points, resistances and supports at which the market will reach sometime in the future, pumps or dumps market will reach those ones someday in surprises of watchers.

Then what you need is historical data.
I think that a free account on tradingview would suffice for that.
Bests,
f.

I would like to ask one important thing; is the risk involved really that big?

I mean we all know that there is a bigger risk to use futures for example versus buying regularly, I keep on buying bitcoin more and more and right now I reached a level that doesn't make sense because I can't really make too much profit unless bitcoin reaches $100k or something, with futures there is a bigger reward but we all know with bigger reward comes bigger risk as well.

So, I would like to ask what is the risk level of futures versus regular buying (long of course, I don't short btc)? Would you say it is very risky and could lose everything very quickly, or is it just a bit riskier? Could I just do it in a way that I risk only slightly more than regular purchase without risking to go all broke?

I would say that buying a future is not different buying the underlying exposure.
Future, generally speaking, have the feature of liquidity, while underlying might be difficult to trade( think of OIL future, for example).
For bitcoin there are a few advantages trading future versus trading bitcoin, but those advantages are mainly appreciated by institutional investors, not private investors.
So I think in your case you should stick to investing in bitcoin, not future.
Buying future wouldn't give any significative difference from buying bitcoins.

Where have you seen it's more risky? And why it would be more risky? Only the leverage matters, but you can trade with no leverage on futures market, and important leverages on spot market, so there are not more risks in trading futures.
As fillippone said, you have much liquidity and volumes on futures market, so it can be easier to scalp and to do small backs and forths trades. Moreover fees are way cheaper, usually you have no funding fees for leverage orders, and negative fees for making orders. On the swaps market you have even negative funding fees for the short orders. And last but not least with futures you can make virtual cash and carry trades.

I don't like futures for Bitcoin or Ethereum. Because they integrate the current economic system with blockchain. More precisely, they transfer the bad aspects of the current economy to the blockchain economy. Bitcoin is limited. So it is valuable.

The bitcoin is the new gold standard and hard money. Nothing prevent us building other layers on top of that for different purposes. The option of having the ultimate hard money is invaluable, and until today (until 2009) this option had been negated to each one of us. The option of having different kind of money for other uses if there is demand for it (speculation? Lending?) has a great value too.

NOT like any of us can really do anything about the existence or NON-existence of such products.  Right?  Good to be aware of these kinds of products to the extent that they might be used to affect, control or manipulate price... or attempted to be used for such.

I think the market manipulation via futures is very overestimated.
Firstly their trading volumes is way less than the one a few big whale can shoot on the market.
Second it is only an historical moment. In the future the liquidity of bitcoin market will be big enough to prevent any “unfair” use of derivatives (think of fx markets today, where liquidity is so massive basically no one can move the markets).

Actually there is, we can choose to not participate in the dilution of the asset class.

We can also educate those that ask this same question why these  unsettled "liquidity supplying, volatility squashing" markets should not be supported but rather the asset itself purchased and held.

Every coin being rolled over in house in these clearing houses is one less actually being bought on chain and that is a direct dilution of the cap.

Think of if no-one had herded to Walmart as was forewarned by so many of us..

Ok.  Fair enough.

I surely remain quite skeptical of these various products to the extent that they represent actual bitcoins, and I really have my doubts regarding the level of their being backed up by actual bitcoins.  Sure, some of them claim to have bitcoin and others don't even claim to be backed up by bitcoins.   

I do accept that there is some value in directly buying bitcoins and directly holding them, so I expect that at some points in our bitcoin future, there are going to be tests of the value of actually having your bitcoins and whether there might end up being some denigration of some of those products because the dynamics in manipulating bitcoin is different from manipulating a market like gold - in terms of at least how easily one can demand possession of millions of dollars of bitcoin and actual act upon such demand (within minutes - maybe 10 minutes to get a confirmation and an hour or so to be able to retransmit the value that you have taken into your possession), whereas the logistics to demand millions of dollars of gold and to verify it is a lot more cumbersome.

If you want institutional money, if you want big traders money for Bitcoin you can't avoid derivatives...
Moreover futures can be very useful for all the miners, they are able to sell at fixed prices several weeks or months before getting their bitcoins.
And don't forget that most of futures exchanges only accept bitcoins. So you need to buy "real" bitcoins before trading on them.

Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. Here, the buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date.

The whole point of "Futures" is ... well, ... at least one purpose is to hedge. To prevent losses from potentially unfavorable price changes rather than to speculate.

At the very least, the futures market is regulated, some are even insured. (I think all of them are insured to some extend, maybe there's a limit.)

Dealing with actual bitcoins, as in holding the private keys to your wallet, is daunting for a lot of people who don't know or even have a clue how the technology works. For the institutional investors, this is where custodial solutions come in. For the private ones, if they know someone like one of us (assuming you know how to do cold storage and stuff like that.)

Miners and traders are now day very happy with their bitcoin because day by day bitcoin is increasing the value and it's being good for trading after holding of specific time periods. Trading right now is not good as the market is under recovery but I think with little patience I will be able to get my target profit just need to be patient.

What does that mean?  Yeah of course, btc prices go up and they go down, and if they go up too quickly, then there is likely to be a decent sized correction, but how the fuck does anyone know how far to take profits.  Yeah, you can play a bit here or there to hedge, but you, Faxmate, seem to be suggesting that you are planning on making some BIG play in the near future to either sell a large portion of your BTC or to short... and seems very risky to me, unless you are just playing with a small amount of your stash.

I will personally concede that I feel a decent level of froth in the whole damned space, and it really does not have to do with futures, as far as I can tell, but of course, futures players remain one of the factors that must be considered.  My worry remains the ongoing pumpening of some of the obvious crap such as the various alt coins.  So yeah, even though the vast majority of them are merely riding off of the coat tails of bitcoin, they just seem to be too eager to pump in ways that just signal (at least from my perspective) needs for correction.  I am not as worried about bitcoin's ability to sustain a decent pump, even beyond the $13,880 top from June 27, 2019... So yeah, there seems to be kind of a need to monitor some of the phony baloney that is taking place on the sidelines, too.. and some of the financial instruments seem to be eying ways to add some of those frothy coins into their options whether referring to their price or sometimes using some phony coin like ethereum as collateral... which seems dangerous as fuck, given their all over the place code base.. and even uncertainties in terms of transitioning its code base... People who play with futures, must be attempting to account for dynamics in the whole space, even if their instruments are utilizing bitcoins more and using bitcoin prices as referents.

So it is better for everyone to first get the knowledge about the wallet, how to use it, how to ensure the security it offers and what are the backups for you before saving your coins. After getting this all information go for the hard wallet if you fear a lot of risks and can have better form of security. This will make you more confident and relax before saving your huge amounts.

Why the fuck do you want them involved at all?

This is a revolution of the people, WE don't need nor want them.

Figures don't lie but liars figure. <<<--- that describes the entire institutional banking system and we should not want them involved on the NEW economy.


We were doing just fine until they started their futures market and skimmed the cap and got their greedy little hands in our pie.

It’s not bitcoin needs Wall Street. It's Wall Street that needs bitcoin.

You cannot really wish institutional investors away, even if you have preferences for them NOT to be here or not to attempt to manipulate the fuck out of the space.  There are also some people who will not invest into anything except through institutional investors and there are also institutional investors that do not take individuals for clients, unless they have like at least a $million to invest.. Love or hate them, they are increasingly coming to the space, and I look forward to some of them getting reckt, even though in the end, they are likely already going to be able to figure out various ways to hedge in order NOT to get REKT, even if they do not really understand their investment asset (referring to BTC).

I guess "you" can decide not to take part on it but as long as there is a demand for it they will continue to exist. You can't just create some sort of strike of bitmex or whatever and suddenly try to get people to stop as well, if people are using it they will continue to use it.

All you can do is to hope people will find this as a hype and slowly start to use it less and less eventually leading to the demise of futures but looks like that is not going to happen anytime soon. I agree that futures are the bad part of current financial system and should have never been part of bitcoin itself but at the same time I have nothing I can do about it neither. Hopefully, overtime we will find a way to over-volume these futures and make them not so important in the current system.

Very often, cryptocurrency users complain about Bitcoin futures, because, in their opinion, before the expiration of fixed-term contracts, the price of Bitcoin reacts to these circumstances and is actively declining.  I couldn’t find a balanced answer anywhere on this question, although it seems to me that trading in Bitcoin futures is much less than the volume of trading in the cryptocurrency market and therefore can not fully influence bitcoin pricing.

Thanks for this information OP, I  already gave you a merit, you certainly deserve it,  Bitcoin's community should read all of this thread especially the newbies or the beginners, it is really helpful to be honest. Hopefully Bitcoin will have a brilliant future.
Plus,  if you have a lack of knowledge in any domain then you will probably gain nothing, in my opinion, knowledge is the key of successful. Unfortunately, most of users think that Bitcoin's field or crypto is complicated and hard to learn, they always want earn money in an easy way without even a  hardwork, and that cannot happen for sure.

You are correct, I cannot wish them away, all I can do is point out why We should not be helping them in any way shape or form and that includes accepting them as inevitable.

When it all boils down they have unlimited funds that are provided by the Fed and obfuscated into the system, the more tools they have to obfuscate those infused funds that dilute the underlying assets value (purchasing power) the easier it is for them to control and hide the process. Therefor by shining a light on their practices and not participating in their schemes is a tertiary act against their actions.

This morning I saw  tweet by PlanB

https://pbs.twimg.com/media/EQC_t0sXkAIh2Ol?format=png&name=small

https://pbs.twimg.com/media/EQC_t0vW4AgM41Q?format=png&name=900x900

https://twitter.com/100trillionUSD/status/1225189897117618182?s=20

Well we saw in the OP how the future curve is shaped.
It has to do with carrying your position untily maturity.
There is no reason why future curve should bend upward after halving, as the spot price is the current best predictor (net of cost of carry) of future prices: if we are sure that the price will move at 100K right after the halving, there is no reason not to buy now.
So the spot price is alwys the best forecast of forward price.

Nice Article today about the importance of Open Interest (despite the slightly click-baitish title):

This Bitcoin Metric Is Over 100% Higher in 2 Months, and It’s Critical for Bulls (https://www.newsbtc.com/2020/02/14/simple-metric-bitcoin-price-verge-critcial-surge-higher/)


This is especially true when relating to BAKKT open interest, that is, contrary to other exchanges' one, directly converted into physical bitcoin.

This post is eligible for my project:



If you think you can help here, just visit the thread!

Russian Translation by FontSeli (https://bitcointalk.org/index.php?action=profile;u=2221613): Bce, чтo вы xoтeли бы знaть o фьючepcax нa BTC (https://bitcointalk.org/index.php?topic=5205822.0)

A few updates on the thread:

• Corrected a few minor typos
• Few minor edits
• Modified a factual error on Market Efficiency Hypothesis. Efficiency is "semi-strong" rather than "weak".

Unfortunately this continues to age well.

The famed Medallion fund of Renaissance technologies hedge fund is poised to enter trading in bitcoin futures.
Not sure if it is bullish or bearish.
https://www.ft.com/content/6ea8207b-b41a-43df-9737-ae481814a8d4

Damn Paywall!

https://archive.is/EIAfy
always search on archive.is
with the ft and many others, you can archive it yourself if no one else has

Can anyone please explain how we get these figures


from the displayed data?

Thank you

Very nice find.
It’s obviously a typo no one noticed until now. It might be originated from an earlier version of the article referring to different data and probably not correctly updated.
I corrected the text and now should be pretty clear.

Thank you for pointing out.

Very well explained ☺️☺️☺️Thank you so much🥰it's mean every contract we earned $2.50? now I understand why I need more Bitcoin for my daughter's future ..

We are approaching the halving.

Volumes and Open interest at CME are on the rise.
They have completely recovered from the liquidation suffered at the march market crash and are now heading towards new highs.

https://talkimg.com/images/2023/05/16/blobe136e749fa7cc182.png

Actually I expect this figure to decline at Close of business as the  current dump will of course mean long position liquidations.

From the CME COT, lower panel in the following graph, we can see the bulk of the long open interest is the retail investor, who got invested only recently.

https://talkimg.com/images/2023/05/16/blob98c8d7c3747ddc2a.png

I am expecting then this category will be the most hit from this last wave of liquidations.

Interesting times ahead!


EDIT:

Coindesk wrote an article on the same topic:

CME Says Volume Surge Shows Strong Institutional Interest Before Bitcoin Halving (https://www.coindesk.com/cme-says-volume-surge-shows-strong-institutional-interest-before-bitcoin-halving)

Anytime.

I was starting to wonder if I missed some easy or complex calculations. Thank you for updating it and thank you for writing it. Now I can go back to reading :).

This post is the equivalent of this another one regarding options (https://bitcointalk.org/index.php?topic=5214418.msg54486747#msg54486747).

This post analyses how the derivatives market has been positioning itself before the halving. Future posts will monitor this positioning, its evolution, and the general market dynamics after the halving. I hope that we will learn something observing markets before and after this so important moment.

Bitcoin futures are traded in a variety of  flavours at different exchanges. The most liquid exchanges are definitely out of reach for the traditional investors, so l  the analysis will focus on the “traditional” regulated trading venues like CME and BAKKT, which are in the reach of the majority of the investment community, as those are the only venues able to handle their many regulatory and operational requirements.

Bitcoin trading volumes and derivatives open interest have been growing steadily in the last months. CME, and also Bakkt to a lesser degree, have been growing steadily, and their funds inflow was from “institutional investors”, not the whales and private investors trading with leveraged accounts on unregulated exchanges. Open interest is at historical high, after the collapse observed during the mid march market rout: investors reinstated the long positions they had before the crash, and that got liquidated by exchanges - this observation also clears the “derivatives market” as a potential source for bitcoin market crash in these weeks).


https://talkimg.com/images/2023/05/16/blob684293621de407fe.png


From the Commitment of Traders Reports at the CME we see that coming into halving the short leveraged accounts have closed their shorts, while the long have increased their positions.

https://talkimg.com/images/2023/05/16/blob2bee2086cf93513c.png

Regarding the shape of the forward curve, we see that the contango still persists, even if the future curve is way flatter than before the market crash in march, then reducing the profitability of cash and carry trades.

As I said, in a future post I will continue this analysis to see how halving impacted option markets.

I did not realize that you had started two topics that seem to be the same topic, in the same section and in the same language.  Is there some kind of mistake?  Shouldn't one of the threads be locked...? ... sure there could be some kind of a reference in a continuing thread to a locked thread.  Is there a difference between the two threads or some kind of reason that two threads serves some meaningful purpose?

Sorry but I disagree.
Those two topics are different.
This one is aimed at explaining and discussing bitcoin futures.
The other one is aimed at explaining bitcoin options.

Those two instruments are quite complicated financial derivative of bitcoin: future is a linear derivative, meaning its price change with a fixed ratio with the one of bitcoin, while options are non linear derivatives, meaning the price of the option changes in a non linear way with the price of bitcoin.

As this difference involve quite a different approach to pricing and use of those instrument, I decided to open two different thread.
Also this is meant to discuss specific option market taxonomy (volatility, smiles, Greeks) that are irrelevant for futures.

Last bit not least I think having two different thread allows more specific questions about the instrument asked from the forum. As always those threads are meant to learn something.

Hope this clarify and more precisely define my choices.

Fair enough...

I misread futures/options, and then prior to today, I had not subscribed to that options thread... so yeah, I agree that they are different topics and they serve a purpose, like you just reiterated..

This is something I wanted to talk about since a long time:

Stablecoin Demand May Drop if Traders Abandon Bitcoin ‘Cash and Carry’ Strategy (https://www.coindesk.com/stablecoin-bitcoin-cash-and-carry)


Cash and Carry is a market neutral strategy used on every financial future markets,, when the future misalign with the forward price. This difference "the base", can be "cashed and carried out" by any arbitrageur".
This kind of activity is the precise reason why usually the two markets are very much aligned.
Of course as the expiry of the future nears,  the difference between the future price and the spot price deceases, so mispricing are very difficult to experience, and even more difficult to exploit (think about the WTI future going negative a couple of days before the expiry, this gigantic misalignment was created right because there was an extreme difficulty in catching the falling knife.

Finally BTC market moved a little bit.
I read enthusiasm here and there for "volumes picking up" and "institutional money flooding the markets", so I just wanted to shed some light on this.

A little foreword to restate my thought about derivatives.
Of course I think derivatives are a good thing for bitcoin, as more liquid markets are a good tool for investors to do a more effective price discovery of bitcoin.
OF course in the short period this can introduce some volatility (insert here "derivatives manipulation" or "gamma trading induced market crash" conspiracy theories"), but I think those markets are beneficial to bitcoin in the long run.
As I am here for the long run, and not daily trading, I think whatever can help discovering the true value of bitcoin, is welcome into the arena.

---

Cryptocompare July Exchange review (https://data.cryptocompare.com/reports/exchange-review-july-2020) gives us a few good information on how exchange volumes moved these last month, I will try to update them a little bit using skew.com and other data.

June and July volumes exibhit a positive momentum, but we are still far from the top volumes reached during May.

https://talkimg.com/images/2023/05/16/blobe068bd233ece7945.png?1

One thing to notice is the constant increase of the derivatives volume compared to the total, now at 41% and consistently up since months.
BEar in mind that here "derivatives" refers to the combined value of bitcoin futures and options added up.

Looking specifically at Derivatives exchange we see the "unregulated exchanges" still play the biggest part, getting most of the volume share. CME and BAKKT are having good results lately, but still they are tiny compared to biggest players:

	If you squint your eyes you can see CME, Bakkt is subpixel dimension.

	https://talkimg.com/images/2023/05/16/blobe3ebb0ff43efd263.png?1	https://talkimg.com/images/2023/05/16/blob8abb72cac0c40857.png
	If you squint your eyes you can see CME, Bakkt is subpixel dimension.	August: different month, same story

It honestly puzzles me how tiny are legacy exchanges compared to "unregulated" exchanges. I bet these is a lot of technical knowledge on these exchange, and as per some interviews I read, also their matching engine is still faster and most efficient (Bitfinex vs Nasdaq, to be specific). So I am guessing how they are so much lagging behind. Probably regulation is playing a huge part here.

BAkkt celebrated their record volume in August, still we are talking about peanuts:

https://talkimg.com/images/2023/05/16/blobaf79b48d1cf3e38d.jpeg

125 Mios in Daily trading wouldn't make them visible yet on the aggregate volume chart. Quite disappointing to be honest.

---

One quick word about options, even if this specifically would pertain to the Everything you wanted to know about BTC options but were afraid to ask! (https://bitcointalk.org/index.php?topic=5214418) thread, I think it is fair to add it here.

	https://talkimg.com/images/2023/05/16/blobd5116982cadfd6b7.png
	Deribit had a 585 mios record volume on 27th of July, but you see a consistent increase in volumes afterwards.

Deribit experienced a record volume in July, surpassing 4 BLN USD cumulated during the whole month, but I can see them beating that record in August
CME options volumes  have been declining this month, while BAKKT is not  present, with only sporadic trading.

And it seems that it has a negative effect on the price of BTC as the schedule options are going to expire today (close to 58 BTC). And yeah, it's really interesting to see Deribit really doing good.

https://i.imgur.com/4NWQjkY.png
Latest data from Skew

Interesting, even if I tend not to give too much credit to expiry manipulation, rather than I credit Powell for this volatility.
Also Deribit had some system failure, that hindered trading.
Anyway please comment on options on the other thread: Everything you wanted to know about BTC options but were afraid to ask! (https://bitcointalk.org/index.php?topic=5214418)
Those two threads already are very similar (some users didn't even realised they were two different ones) I would like to avoid confusion.

Bakkt Futures hitting a new record.

https://pbs.twimg.com/media/EiBBY4BXkAEtPri?format=jpg&name=900x900
https://twitter.com/BakktBot/status/1306115788995260424?s=20

Numbers looks pretty solid per BAKKT standards: Undolfed graph seems to confirm:
https://pbs.twimg.com/media/EiA5ybVWAAEkAUm?format=jpg&name=4096x4096

The problem is when you put those numbers in perspective: leaving alone every major exchange and concetnrating on CME only the situation is not looking good either:

	https://talkimg.com/images/2023/05/16/blob63e09dee95ee7c23.png	https://talkimg.com/images/2023/05/16/blob13a5fed1959eae71.png
	VOlumes: BAKKT Volume are on the rise, but a tiny fraction of CME	Open Interest: BAKKT is barely visible

Bear in mind CME is only a fraction, as per volumes and Open Interest, of trading on BitMex or OKeX exchanges.

Looks like we have a massive bitcoin options (10,000 BTC) will expire at the end of the month. Most of them on September 25. So it will be interesting as what it can bring to the ecosystem, specially in the 25th.

https://talkimg.com/images/2023/10/19/RbSYo.png

Bitcoin options open interest is back to the $2 billion ++ mark again this September.

https://talkimg.com/images/2023/10/19/RbZ8T.png

https://analytics.skew.com/dashboard/bitcoin-options

I would like to keep this thread on topic, discussing futures only.
You are more than welcome to discuss option subjects in the options thread.
Everything you wanted to know about BTC options but were afraid to ask! (https://bitcointalk.org/index.php?topic=5214418)

Time to analyse a mechanism used typically by Bitcoin Futures: the funding mechanism. The idea of this post came to me reading a post from Joe, an infamous whale in the bitcoin market:

https://twitter.com/J0E007/status/1288567031399428097?s=20

This definitely caught my attention, as I wanted to explain futures funding in detail in my thread, but I hadn't done so far.
I am trying to explain in this post what is future funding, and what is the arbitrage Joe is referring to.

---

I am going to describe funding mechanism using the exchange examples. There is a very little variation from the various exchanges. I will quote the relevant part, with minimal edit from me, as those explications can be found almost with the same wording on every exchange providing perpetual futures. So I don't wan to to be accused of plagiarism for something that is already been cloned over and over the internet.

---

A perpetual future is a type of Futures Contract that doesn’t have an expiration date or settlement. These are quite uncommon in traditional markets, and, as long as I know, are used only in bitcoin trading. A Perpetual Contract is similar to a traditional futures contract in terms of trading, yet as it will not expire so that you can hold a position for as long as you wish. Given the fact it cannot hold close to the underlying price with the classical “no arbitrage-condition on expiry dates”, Perpetual Contracts track the underlying Index Price via the funding system.


Please note that this is a transaction directly between the two sides on the open interest, there is no commission from the exchange, as the ultimate reason for this is to avoid the opening of arbitrage windows between the perpetual futures and the underlying index. If a trader closes his position before the snapshot no payment is expected against the exchange.

In the following example, I will try to explain the calculation of the funding. The computation is really similar for many of the exchanges, bar some negligible details.

What is Funding?

Impact price, bid or offer is the average price at which a certain amount of BTC can be executed. This is done to take into account the depth of the market, rather than the nominal bid-offer price, that can be irrelevant in thin markets. Usually, for the perpetual futures, the impact price is calculated on a size of 10 BTC.

Fair basis is instead used to "drag" the future price toward the Fair price at around the timing of Funding Timestamp. Funding Basis is computed every Minute.


Bear in mind that Position Value is not impacted by the future leverage. For example, if you hold 10 BTCUSD contracts with 100x leverage funding is charged/received on the notional value of those contracts (10 BTC) , and is not computed on how much margin you have assigned to the position (that is determined computing the total exposure of 10000.

Funding Rate Calculations

Premium / Discount Component
The perpetual contract is a totally separated market from the underlying. Also, as it never expires, there is no arbitrage condition pulling the price to the underlying market. To avoid the dislocation of the future, something that could hinder his effectiveness as an hedging and speculative tool, a mechanism is put in effect to induce market participants to rationally adjust the price toward the expected value: this mechanism is the funding system.


Funding Fees
The exchanges don’t charge any fees on funding. The funding is exchanged directly between the long and short position holders. This gives the maximum liquidity to the funding system, avoiding arbitrage possibility and ensuring the most accurate pricing of the future itself, which is ultimately in exchange interest.

---

To help you familiarise with all the above computation I readied up a

---

Back to Joe's tweet.

I don't know it it looks so great after all.

According do his calculations, with a 10 BTC position spreading FTX vs Bitfinex (20 BT locked) you could potentially yield a little bit less than 0.015 BTC per day.
In my humble opinion he misread a rate and my computation lead me to an even lower outcome of 0.004 BTC per day when computing the correct rates.

Big news in the future market:


Source: https://www.cftc.gov/PressRoom/PressReleases/8270-20

Basically, one of the top guys at BitMex, namely the CTO, got arrested.
Apparently their funds were holded on a 3 of 4 multisig address containing 193,000 BTC.
For sure the CTO was one of the 4 signer of those addresses.



https://twitter.com/nic__carter/status/1311706827982360576?s=20


Futures Markets were quick to react on the news, and traders literally scrambled to colse their positions on Bitmex: open interest dropped more than 14,000 BTC in a few hours, and slowly continuing to decline to a total of 34,000 BTC widthawn so far, according to Coindesk (https://static.coindesk.com/wp-content/uploads/2020/10/EjUEnB3XgAAtmT1.jpeg)



https://talkimg.com/images/2023/05/16/blobc52a5438726e48c2.png

The reaction was particularly heavy on futures positions. Traders were quick to close their positions on BitMex fearing to have their funds locked on the exchange. This thing is really scary for a future traders willing to do an "arbitrage" activity between exchanges, where the speed of transfer of funds between exchanges is vital.

Trying to calm the markets they started manually processing the withdraw requests ahead of time. This was crucial in restoring, as it were possible, a little bit of faith in the exchange.

The situation is well wrapped up by this piece by BTC Times
BitMEX Owners Charged With Illegally Operating a Crypto Derivatives Trading Platform (https://www.btctimes.com/news/bitmex-owners-charged-with-illegally-operating--crypto-trading-platform)

What it interest me the most is the reaction on the futures market:

1. Bid/Offer Spread:

The following is the daily average Bid/offer Spread for 10 Millions on Bitmex

https://talkimg.com/images/2023/05/16/bloba9eec7e3c49c59b1.png

As you can see no major reaction from the cristi, spreads remained tight, a little bit of widening due to diminished liquidity, but nothing extraordinary. This is a very positive sign, after all.

ùThe following is another representation of the above. You can only barely notice something happened on Oct 1st:

https://talkimg.com/images/2023/05/16/blobc0cc88707e04f62f.png


2. Basis Spread vs. Future.
Of course basis collapsed, nobody wanted to hold bitcoin on the long end on Bitmex, this raised the cost of carry, thus reducing the basis.

https://talkimg.com/images/2023/05/16/blobc4c1127223ac5758.png

This is a very exchange-specific fact, as we see the basis didn't change on Binance, or any other exchange

3. Funding

As there was a rush to close the futures, to withdraw liquidity, there was a slight imbalance also in positions, this reflected in a few blips in the funding (from positive, to negative, then positive again, then more negative)

https://talkimg.com/images/2023/05/16/blob4ceacb1d68cde612.png

But as traders were draining liquidity from both sides of the trade overall, funding was little affected.

---

Conclusion: Bitmex had a severe hit in reputation, which is an utterly important factor considering an exchange.
From a technical point of view, markets have been smoothly functioning throughout the event, the exchange was even ready to amend their strict procedures (manual signing of transfer) in order to reassure the market participants about their solvency. This is equally important.

This is not an accurate statement, fillippone.

One of the top 4 guys was arrested and three others were charged. 

"Arrested" would more accurately describe some how being physically restrained (even if later released) - and physical restraint only happened to one of them so far, as far as any of us knows as I type this post.  Unless you have news that is not otherwise currently known by yours truly?

You are absolutely correct.
 I changed the wording a couple of times and "one of the" got stuck in the keyboard in the final edit, changing the meaning of the sentence.
Thanks for pointing out. I also edited to make it more clear why everyone panicked for this.

Time to celebrate at CME.
They sent out some interesting graphs to their newsletter readers, celebrating the success of their products:


https://talkimg.com/images/2023/05/16/blob47e8258e09825ffe.jpeg



https://talkimg.com/images/2023/05/16/blobd521cdab77739c76.jpeg


Slightly off topic here, but also Options saw an solid growth in Q3, after being launched in Q12020:

https://talkimg.com/images/2023/05/16/blob60385eef26d37983.jpeg


Of course, those numbers must be taken with a pinch of salt.
Zooming out to the industry, we see CME is certainly picking up, but is still lagging massively behind other exchanges:

https://talkimg.com/images/2023/05/16/blob735f787f1cc384a8.png

Of course we are comparing apple with pears here, as there is a massive distinction from "fully compliant" exchanges, and the "rogue exchanges" in less legally demanding jurisdictions.
As we have seen anyway, regulators are becoming tougher on less regulated exchanges, so I guess players who are more compliant with current financial regulations have a massive upside potential, to gather institutional money.

I must say thing evolved pretty fast.

The  crack down on "unregulated" platform, coupled wit the bull run, who attracted more actors in the Bitcoin environment, presumably "institutional inventors" apparently favourited the CME.

CME has now the second biggest Open Interest amongst Bitcoin exchanges:

https://talkimg.com/images/2023/05/16/blobb1f1ae5c1e8a9e20.png

The open interest is the measure of the "open positions" on the exchange, and is a more reliable metric when we want to look at "investment" positions, rather than trading positions.

If we look at the trading volumes, actually the situation is quite different:

https://talkimg.com/images/2023/05/16/blobc418817e648967a4.png

There we see CME is still lagging behind many exchanges.

Of course, raw trading volumes cannot be considered a good indicator, as they can be faked in many ways, as many studies have demonstrated. Volumes must be coupled with other indicators if we want to assess the liquidity and the reliability of an exchange.


In the following graph we appreciate the fact that, albeit on the rise, trading volumes at CME have been tiny, when compared to OKEx.

https://talkimg.com/images/2023/05/16/blob722065bc044cb97f.png

Notice of course CME is closed on the weekends, something legacy exchanges must avoid as soon as possible to gain competitivity.

While the trading volumes have been slowly rising, the open interest has been rising steadily in the last month.

https://talkimg.com/images/2023/05/16/blob3fbdae1211abf64d.png

if we "zoom" on the CME we can appreciate  the growth of both metrics.

https://talkimg.com/images/2023/05/16/blobfeca6642d1076fb7.png


Of course it's like we have a magnifying glass: we know on the trading volumes there is still a lot to be done in my opinion.

Open Interest growth is anyway impressive in my opinion, and above all quite "unexpected". But exchange are looking for volumes to gain marketing exposure and headlines, but they look at open interest to gain a steady inflows and loyal customers, meaning revenues on the long run.
Institutional money look at depth in markets, and reliability, they might not be interested in trading volumes, if the exchange cannot provide them with a fully qualified legal framework, insurance coverage included. On these aspects CME can play at par with the other exchanges.
OF course the liquidity can be improved, and of course the anachronistic stop during the weekends must be somehow eliminated for CME to fully compete in this arena.
 

In order to complete Yesterday analysis, some movement on the COT published by CME:

https://talkimg.com/images/2023/05/16/bloba254ba8918c5c96c.jpeg

We see that the two most directional investor categories have started to diverge retail are at record longs, while HF's are at record short.
So one could start asking: who's right?
Well, the answer could be: both.

On CME website (https://www.cmegroup.com/tools-information/quikstrike/commitment-of-traders-agricultural.html) we can analyse some more details:

https://talkimg.com/images/2023/05/16/blob9a05188b12a6a783.png

Here you can see the long and short position of each category. The most relevant is actually the leveraged funds one, with both longs and shorts position, but currently with a net negative exposure.
On the other hand categories like Asset Managers are long only, with no short position whatsoever. Of course they are probably hedging client's positions.
Another very imbalanced category is the "Not Reportable", that is probably identifiable with the retail accounts.


The graph is not exactly readable, but if you go on the website you can open detailed tables like this one:

https://talkimg.com/images/2023/05/16/blob8d39f0f06199888c.png

What I mean is that provably retail accounts, and asset managers, are pure longs, hedging long positions of their clients.
Leveraged funds , on the other hand, are more difficult to read, as their rationale could be not so clear.
A short position could be initiated for a cash and carry strategy (that is a neutral strategy, aimed at capturing a positive future basis), or an arbitrage between exchanges (again a neutral strategy), or a partial coverage of a long underlying positions.
What I mean is that in these COT documents, we are probably looking at a leg only of the total exposure.

On the infamous JPM report "Bitcoin’s competition with gold (https://en.icointime.com/post/345102686158.html)" there was an interesting section about the interpretation of the open interest.

First they analysied the open interested, in a similar way we made mutiple time on this thread.



https://talkimg.com/images/2023/05/16/blob3d5bb822ce2495f7.png


This is pretty" standard" analyisis, and I tried digging a little bit further on the numbers like in the previous post.

Something new surfaced on the following bit.



https://talkimg.com/images/2023/05/16/blob66fdfe5121abefc2.png

Well, this is an extremely interesting way to approach on the matter, and I will surely try to "replicate" it on my future analysis.

CME is excellently riding this BTC run.

We can see they consistently are the second biggest exchange under the Open Interest Metric:

https://talkimg.com/images/2023/05/16/blob567775696eb334b9.png

Binance is closing the gap, but since last update we see bigger overall values: this is a sign of bigger investor involvement in the market.

Numbers look pretty neat for CME: both volumes and open interest value in USD are going up:

https://talkimg.com/images/2023/05/16/blob2da7d587cf91fd45.png

Of course a large effect of these numbers going up are caused by BTCUSD going north in the first place. With higher BTC every dollar based metric is looking good, and can be used to celebrate successes (as Barry Silbert teaches us!)

On CME website we have an indication on Open Interest in BTC units:

https://talkimg.com/images/2023/05/16/blobcbc8ea8f64d3e4a3.png

Of course this quantity is not directly influenced by USD quotes, so using a spy of mine I was able to gather an historical graph of that:

https://talkimg.com/images/2023/05/16/blob8a9489cace704043.jpeg

Here we can appreciate the fact the Open Interest is going up at 11,700 contract, but back in August the absolute number of contract was higher]@15,500 with a similar USD amount.

I think this level is then important and that institutional players could fade the move in BTC in case of further appreciation, as probably this USD level  i relevant.
Keep in mind that the dollar is still the main unit of account for many of those players; MicroStrategy being the only notable exception to this (https://bitcointalk.org/index.php?topic=5268108).

Blockfi Review 2020: Pros and Cons - how to get bitcoin loan https://cryptocrow.net/bitcoinloans/

Bit news for the CME, that is now venturing in the retail market:

https://talkimg.com/images/2023/05/16/blob7e39f1e098df42c4.png

CME Group to Launch Micro Bitcoin Futures on May 3 (https://www.cmegroup.com/media-room/press-releases/2021/3/30/cme_group_to_launchmicrobitcoinfuturesonmay3.html?utm_source=twitter&utm_medium=organic_social&utm_campaign=micro_bitcoin_launch&utm_content=20210330_institutional_announcement#)


More detail can be found here:
https://www.cmegroup.com/trading/micro-bitcoin-futures.html




So, the notional of this. future will be around 6,000 USD instead of the USD 300,000 of the standard contract.
This will help the retail adoptions of financial futures, supposedly bringing more liquidity.
Of course, it will become easier for hodlers to play the cash&carry game.

Small fishes: rejoice!

A very interesting thread on Twitter, about futures, cash and caddy and contango.

Let's analyise it:
https://talkimg.com/images/2023/05/16/blob98ecb97c733ad013.png
https://twitter.com/caprioleio/status/1377326629077315589?s=20

The attached image is this one:
https://pbs.twimg.com/media/Ex0-3b8W8AY_S7S?format=png&name=900x900

This is the CFTC COT (Commitment of Traders). We have seen this, it's a recap of the Open Interest broke down in various macro-categories of accounts.

Well, we see that the Asset Managers are roughly flat, while "Others", a residual category, and "non Reported", meaning retail, are net-long long. The only big short category is the Hedge Funds community.

What does it mean?
Let's look at the expiry curve in the BTC futures.

https://talkimg.com/images/2023/05/16/blobefba7d672c4832ad.png

This is Deribit, but every other future exchange has a similar shape.

If you remember well, this shape is called CONTANGO:


https://talkimg.com/images/2023/05/16/bloba2c2ffc8cedc2755.png

An upward shape, with longer expiries with a higher price.


One idea would be of trying to capture this premium by selling the future and buying the underlying position.
If the costs involved in this plays are below the price difference, we actually have a risk free profit.

https://talkimg.com/images/2023/05/16/blobc089d6a018d0cdd1.png


This is exactly what hedge funds are doing in bigger and bigger sizes. An astute observer might think that those positions are meant to be held until expiry, so the short positions on the future leg, imply a long position must be matched. This is another drain in the bitcoin supply: if those coins are locked in this risk-free trade, they cannot be used to be sold or lent to be sold by those who want to sell the market (hence a quite rise in BTC funding rates)

https://talkimg.com/images/2023/05/16/blob1c8b913059db37ca.png

But this is another story.

Apparently, I am not the only one looking into Bitcoin futures contango.
A very good article on Bitcoin Magazine tries to explain what is a Contango, why it is present in Bitcoin futures and if it is going to stay there for long.


A DEEP DIVE INTO BITCOIN’S CONTANGO (https://bitcoinmagazine.com/markets/a-deep-dive-into-bitcoins-contango)

It's quite a technical article, but even if you don't grasp all the details, it's a good way to try to understand what is happening in bitcoin markets nowadays.


Recommend read.
Also, remember I am always here to help.

Finally, also Bakkt is moving away from the zero they registered during last month.
Actually, Bakkt is experiencing his record open interest:

https://talkimg.com/images/2023/05/16/blob98d98b2c730709a8.jpeg

Well, this other diagram will help to put all this in the right perspective:

https://talkimg.com/images/2023/05/16/blobfb4577a6c37ab310.png

While it might be unfair to compare Bakkt with some unregulated exchanges, it's worth noticing the comparison with the CME who has an OI 25 times bigger.

Looks like the Bitcoin contango is the hot topic of the day.
Bitcoin Magazine publishes a good recap of a J.P. Morgan report detailing how to play the bitcoin futures curve:


JPMORGAN EYEING BITCOIN’S CONTANGO, RELEASES BULLISH REPORT (https://bitcoinmagazine.com/markets/jpmorgan-eyeing-bitcoins-contango-releases-bullish-report)



I guess it is pretty natural, given the abundant yield it can be extracted from the market via cash and carry operation:

https://talkimg.com/images/2023/05/16/blob3c5123016232e218.png

I want just to add you can find the original article here:
Wall Street Reports On Bitcoin (https://bitcointalk.org/index.php?topic=5304479.msg56764573#msg56764573)

Once again, an entertaining read on contango, this time by Arthur Heyes:

ALL ABOARD! (https://cryptohayes.medium.com/all-aboard-4d50435190d6)

https://talkimg.com/images/2023/05/16/blob956a0a5d7175d24d.png


The guy might be a pirate, but for sure can write entertaining articles.

Cool ... I don't even know how I missed this thread.
A little later, I will also share some details and perhaps formulate a couple of questions, (Simply put, from now on I am watching you).  8)

[1] The beginner's guide to technical analysis: https://www.babypips.com/learn/forex/elementary ^{[discuss questions of interest]}

CME is proving to be the main exchange for the “institutional” cohort of bitcoin trades.
Thence they stand out a little form the crowd. They have a few characteristic that put them on a different plan from the others.
Their future basis is lower than other exchange, meaning their future is being pushed down by institutional more than other markets.
In fact,  they tend to have lower trading activity with higher OI data, as they were used to hodl positions.

This doesn’t mean they haven’t done well this last quarter:


CME Group: Q1 2021 Bitcoin Futures Revenue ‘Higher Than the Entirety of Last Year’
 (https://www.cryptoglobe.com/latest/2021/04/cme-group-q1-2021-bitcoin-futures-revenue-higher-than-the-entirety-of-last-year/)

This thread is very usefull, because a few days ago there was someone who told me that the purpose of the future is actually very good this is a tool used for hedging. Moreover, companies need exact figures regarding future transactions that are often carried out for the purposes of their financial reports and their budgeting. However, today the market for the future is being damaged by the Popes who use the future not in its place, but as speculation. I was confused at first, because I didn't really understand about the future let alone BTC in the future, and finally I found the thread that you made. It was that you wrote that the use of Future is not only for hedging but for speculation as well. So why do some of my friends think that futures are used for speculation can damage the market and they are attributing the decline in BTC prices some time yesterday because BTC futures are due. Is that true?

Futures can for sure be used for both speculation and hedging. Futures are just a tool in the hands of the investors.
If used as a speculation tool futures have the advantage of leverage.
This means that with the same amount of money speculators can control a bigger amount of BTC, hence influence the market more efficiently.
is that damage? I don't know. Speculators take their risk and put their capital at work.
I don't know if it is unfair. In the end, they can very much likely lose their capital.
 

I appreciate it all for such a valuable data and Usually a good finding for this reason and it'll make sense clear that nothing isn't a straightforward assignment for long haul reason inside this blockchain framework, it's truly an acknowledged assignment which has done and I moreover accept that Bakkt isn't however prepared to require the challenges to the favor of Bitcoin, one of the most issues in this stage is the cost instability so Bakkt will not competent to do something with respect to this issue, so diminishes will stay same and Bitcoin will pick up more space inside this framework.

This is gold.

Contango plays on CME, how to gain from it, why it is still present:

 How institutions are searching for crypto yields (https://skew.com/blog/how-institutions-are-searching-for-crypto-yields)

https://assets-global.website-files.com/5e837ad4a4988507bc0c3c01/60797a2a16c3358ecc62c9df_skew_btc_futures_annualized_rolling_3mth_basis.png

This is a very nice article, detailing not only where is the “arbitrage” but also why it is there and what are the underlying dynamics.

The days of the 20% contango at the CME are numbered:

UPDATE 1-Goldman launches cryptocurrency trading team -memo (https://finance.yahoo.com/news/1-goldman-launches-cryptocurrency-trading-153426389.html)


Finally someone big enough came to the market. Soon they will start selling the future against the underlying flattening the curve.
We will see who will prevail between GS and the leveraged longs.

CME launched a new version of their futures:

CME Group’s Micro Bitcoin Futures Open for Trading (https://www.coindesk.com/cme-micro-bitcoin-futures)


So basically, instead of controlling the usual 5 BTC, a microbitcoin future will control only a tenth of a bitcoin.
Hence the capital will decrease from 300,000 USD equivalent to 6,000 USD.
This means many more traders will be able to benefit from the liquidity, reliability and compliance of the trading venue at CME.


Link to the Official Press release:
CME Group Announces Launch of Micro Bitcoin Futures (https://www.cmegroup.com/media-room/press-releases/2021/5/03/cme_group_announceslaunchofmicrobitcoinfutures.html#)

We saw that coming, but not so fast!

https://talkimg.com/images/2023/05/16/blobed0cf6702012187f.png
 (https://twitter.com/skewdotcom/status/1393132333465808897?s=20)https://twitter.com/skewdotcom/status/1393132333465808897?s=20

Obviously, when you put in the same arena

• A few investment bank trading desks, playing the cash and carry game
• The micro-bitcoin future, lowering the capital requirement to play the cash and carry game
• A bearish price action taking out a a few leveraged buys

Of course the curve must flatten.

Detail of the above image:
https://pbs.twimg.com/media/E1Vlbt5WEAA2KGm?format=jpg&name=large

From 23% to 3% in three months. This is impressive.
I am just wondering how many bitcoin were needed to do so. I think it's difficult to extrapolate this information from the publicily available data.

This guy literally reads my mind ... Frankly speaking, in order not to scatter attention, I would prefer that there was only one accessible and understandable thread about Futures, (with the transition from basic knowledge to information published in the OP). Below are a few questions that I would like to know the answers to if I were a beginner.

• How theory differs from practice?
• The basics of hedging for beginners, (including strategies)
• How not to miss the bottom, (for example, is it worth placing a duplicate contract for price growth in an incomprehensible situation?)
• Action plan as an integral part, (where and when I should close the trade?)
• Security, (Trading against the trend, why my stop loss did not work, etc.)
• Test mode, (on which platforms can I get my first experience of futures trading without risking?)

Tank you for the input. I will try to analyse a few of those questions in future update(pun intended).

Please bear in mind that while a few question are good material for beginners (test platform one is quite good), other are the holy grail of trading (how not to miss a bottom? When closing a trade?): I don’t have this answer, as nobody has. And even if I had, for sure I wouldn’t share it, for free of for a paying fee, as this would severely undermine my competitive advantage in the trading.

This mean: everyone selling magic recipes in trading is, basically, a scammer.

Even though icopress seemed to have been presenting himself as a bit of a newbie in this category, I do believe that he could have attempted to provide some of the answers himself in order to help the subject along.

I don't employ a variety of more sophisticated financial tools in my own tactics, even though I figure that there are ways to allow them to better hedge my positions or even to allow me more optionality, downside risk etc, yet, I also know that there are some folks that will give away some of their strategies for free, and some of those strategies may well be quite solid in terms of managing your own situation that are not necessarily any better than if you were to pay for advices.   

My post was kind of just an impulse, so to speak, an example of questions that, in my opinion, a beginner should study immediately after he learned the meaning of the word "futures". I didn’t want to sound like an upstart, so I didn’t give answers to these questions, (although I found out the answers to most of the questions, simply making mistakes over and over again/losing money). Therefore, of course, if within the framework of this thread there is at least one person interested in futures trading who asks me about something, then I will be happy to answer.

I totally agree with this expression, but I have another question. ^{[Are you personally involved in futures trading?]} I would even call this a rhetorical question, since I lead to the fact that disclosure would undermine your competitive advantage only if you were trading. But I'm also pretty sure that posting the intricacies of trading, regular updates, and answering questions will ultimately lead you to become a more disciplined, more knowledgeable trader. ;)

Overall, I cannot really disagree with any of your points, icopress, and even though, like I suggested, I do not involve myself in various kinds of sophisticated financial instruments, I kind of was passive aggressively implying that none of them are really necessary for individuals in bitcoin - unless they really know how and why to employ such tactics - and they are also temptations of attempting to get rich quicker than what conventional basic mechanisms might achieve.

In other words, bitcoin seems to remain as such a goddamned asymmetric bet that even someone who is brand new to bitcoin and investing (such as fresh out of highschool /college and freshly beginning to invest), and just employed basic techniques of buying and holding BTC, the other tools (such as futures, options, margin, leverage through exchanges, shorts, leveraging bitcoins for debt) would not be necessary in order to accelerate these newbies to fuck you status in about half the time (or even less) than traditional investment allocations would have accomplished.  

Accordingly, just engaging in various kinds of longing of bitcoin could cause a regular normie into fuck you status in 10 to 20 years rather than 30-40 years of the traditional systems -  that are also far from guaranteed of reaching fuck you status in traditional systems.  By the way, many of us likely know about regular peeps who had been prudent all of their life and invested and saved, and they still were forced to work into their 60s or longer because they just did not have enough money to pull the fuck you lever.

I understand that my personal expansion of what I meant in my earlier posts causes this post to largely deviate from the topic, but I do mostly assert on a regular basis that newbies should be continuously working ways to slowly build their principle in conservative ways, and sure when they are young they can surely take some additional risks, so while they are attempting to invest more conservatively, they can continue to study the various investment options to figure out whether any of those more sophisticated investment options might work for them and their situation.. including that after 5 years investing in bitcoin, even at $100 per month (which would add up to $26k in 5 years), there could well be a very decent amount of investment capital that had accumulated through that time, such as half a million (as shown in this chart) (https://dcabtc.com?sd=2016-05-15&sda=5_years&f=weekly&d=5_years&ac=10000&c=true), and even if fuck you status had not been reached, the person is well on the way to possibly achieving fuck you status in a 10 to 15 year timeline - assuming that $2 million in today's dollars would be the bare beginning point to fuck you status and of course, with the passage of time - even 10-20 years from now, that $2 million in today's dollars may well need to double or more for a bare basic starting point for fuck you status, but if decent appreciations of BTC value continue to outpace other assets and investments (which seems quite likely), then there may well be abilities to really increase contributions too with the passage of time and to accelerate the capital invested into bitcoin and likely to be able to monitor and study the bitcoin space in such a way to know whether there might be some ways to compliment such bitcoin investments without getting sidetracked into shitcoins or even financial vehicles that might not be worth employing.. not saying that futures might not work but that it could take a few years for any newbie to study the matter (and maybe include consulting too) in order to figure out if it might be a good vehicle to complement individual investing beyond buying and hodling.

Of course, the past abilities to accumulate in bitcoin and to witness price appreciation that outpaces almost any other asset or investment does not mean the same numbers of price appreciation are achievable in the future, but there is no real evidence that the investment thesis in bitcoin is getting any worse, so I still am suggesting that normies and newbies start out with similar tactics of solidifying their basics before employing more complicated tools that may or may not be necessary to reach fuck you status in a pretty reasonable time (such as half the time or less as investing in traditional assets.. which I would include a lot of the various bullshit out there currently to fall into that category, too).  I ongoingly share my ideas and even helping to work through what are the basics that need to be considered for free in several public threads when the topic comes up.  Accordingly, a lot of peeps do not even understand their particular basics that should include considerations of their cashflow, other investments, view of bitcoin compared with other investments, timeline, risk tolerance, and skills, time and abilities to study, learn, plan, strategies, employ various tools that might include trading, reallocating from time to time and/or other possible financial instruments (which would likely come after they had already made sure that they had a somewhat solid grasp on their basics).

Let me answer to this.
I disclosed a lot of knowledge about the trading future, and options. I explained the basic stuff, vocabulary, and basic strategies.
I never told anyone how to trade their stash, when opening a position, and when closing it.
I never commented on other people's analysis or trading strategies (with only one notable exception (https://bitcointalk.org/index.php?topic=5214418.msg55780481#msg55780481)).

So, I might or might not be involved in future, but I never tried to "sell" any trading strategy. Even more, I have too much respect for each one risk and time preferences, personal constraints knowledge or history, or other facts that might determine their trading style, to comment on other people actions, besides correcting factual errors.


EDIT: fixed a quoting error. I am not talking alone, this time.

It surely seems to be a bit of a dilemma fillippone, especially for someone who either does not have an outside cashflow already established to be able to attempt to spend a lot of time on bitcoin related matters and other stuff and not be wanting to attempt to monetize their time spent to some extent.  I tend to recommend a variety of self-help mechanisms, and I also tend to be weary about purported experts - even when I am forced to consult with them - and not even saying that they are not necessarily very knowledgeable in their field if they do it full time, but there might also be a variety of vehicles that they employ to keep their clients dependent upon them rather than providing self-help kinds of knowledge.

I understand also that there are some clients that might just say fuck it.  The fee is cheap enough (whether it is .5% per annum or up to 2%) that they might feel that it is well worth the fee - even though the higher the fee, the more difficult it will be to justify continuing with the use of such services, in the event that the advisor is custodying or the consulting is for one-shot time frames and perhaps flat fees?

Financial managers likely need to employ a variety of complicated financial instruments to establish to their clients that they are "doing something" even if some clients might realize that in the whole scheme of thing (including after the fees) their portfolio may well not be doing better than if they self directed into an index fund, and surely bitcoin should be providing further justifications that such complicated instruments are not necessary because on average bitcoin even outperforms the best of the prior investments (index funds), and so whether I personally am correct or not, I do not give too many shits, but many times when peeps are talking about a variety of sophisticated instruments, I still continue to assert one of the best places to start (especially in bitcoin) is to get your basics down, and in the longer term - (such as 4 years or longer - might take 10 years perhaps), your financial portfolio will quite likely outperform your having had employed a variety of other financial instruments into such investments.  

So for me, getting the basics straight is a starting point, but it is NOT necessarily exclusive, especially if some peeps might feel that they have more time, then they might experiment with other financial instruments to attempt to complement their approach once they have assured that they got their basics straight, whether that is the use of futures, options, leverage, margin, shorts, etc.. some of them are easier to learn about and to figure out how to use than others...

And, yeah it seems to me that each financial instrument that is employed, there is a possibility that the investor is magnifying the risk, even though the instrument is meant to allow for the lessening of risk, if it is used properly... and another trade off could be that the employment of some of the financial instruments ends up taking away some of the upside profit potential because it ends up betting in both directions - which may or may not be needed in my thinking, so for example, when I got into bitcoin, I already had a significant amount of investment already into a variety of traditional investments that were largely dollar based.  So, I had already figured that my bitcoin investment was already a hedge against that, and so even if I ended up accumulating a relatively decent amount of value in bitcoin, it still was not as large as my various dollar based investments - even though through the years - because of bitcoin's value appreciation relative to the dollar became so much larger and larger portions of my overall value and even outgrew the dollar-related appropriated investments, which at that point justified that I should attempt to take some measures within my BTC holdings to attempt to ameliorate some of the downside risk within the BTC portion (because its value became so great).  

Of course, if someone is coming into investment, and they have no other investments besides bitcoin, then it could be prudent to actually consider hedging mechanisms right from the start... I doubt that I am really good at speaking to that.. but I do understand that the various mechanisms that I already discussed, including considerations of futures, might thereby become more relevant to a person in such a financial/psychological circumstance.

Hopefully I am not derailing your thread too much when it comes to attempting to consider basics before even considering whether futures might be a good thing for normies to attempt to employ...which seems to be part of the point that I am trying to make .. in a kind of long-winded way.

By the way.. in my response above, I fixed the quotes in fillippone's post to clarify which comments were from icopress - otherwise it may well appear that fillippone is merely talking to himself.. which might happen from time to time, but not in this particular case.. hahahahaha

One month into bitcoin futures CME is doing a recap of the situation.

Micro Bitcoin futures: one-month trading recap
Micro-sized bitcoin, major possibilities (https://go.cmegroup.com/webmail/502091/999963543/b40f90cbb7edd9e27a354bdc4e4e7ac500275bf3ad9d161be359106ffe484527)

A quick update on contango: for a variety of reason we have explored in the previous posts, the steep contango that was characterising the BTC future curve, has now gone, for the desperation of all cash&carry traders.

If we look at the weekly CoT documents by the CME:

https://talkimg.com/images/2023/05/16/blobf1be6be736acf5fa.jpeg

We see that leveraged accounts have been recently buying back their shorts as there is less profitability to sell the future against buying the underlying. Hence many of those positions got closed.

Finally I found a graph or the reason behind the closing of position I mentioned in the previous post:

https://talkimg.com/images/2023/05/16/blob0f1735ef35f231c8.jpeg

Here you can see the contango of the bitcoin futures curve has disappeared completely, and it actually now has a backwardation shape. If you recall the OP correctly , backwardation means that future prices are lower than current one (spot price).
In the graph above backwardation happens when the basis line crosses below zero.

An interesting article on carry trade by Coindesk:

How One Fund Used the Carry Trade to Beat Bitcoin
 (https://www.coindesk.com/how-one-fund-used-carry-trade-beat-bitcoin)


Yes, this is the basic idea I have been mentioning in the last posts here.

The closing paragrap is quite distrubing to me:



This is a totally different trade: carry trade is basically an arbitrage: a riskless (or with limited risks) position while shorting options is one of the riskiest positions I can think of.
Really, mixing apples and pears.

A very interesting tweet today:


https://talkimg.com/images/2023/05/16/blob0ce41790b606ae0e.jpeg
https://twitter.com/btcization/status/1423692870771425290?s=21

What does it mean?

When the funding rate is high, means that future long open interest is high, so future holders pay an high price to maintain their longs.

The fact that funding rate is so low now, means that this move is not a derivatives driven squeeze, rather it is a spot driven move. This means that there are less stops to be triggered, and rally is much more solid.

Very nice.

Some very interesting development in the futures market.
There are many tweets and article out there with the same content.
I will try to provide a summary of them in the most complete way.

There is a big push in CME futures markets.
There are a few sign of it:

• CME futures are trading dearer that other exchange. CME futures rarely trade at premium against other exchanges' futures:
  https://talkimg.com/images/2023/05/15/blob2d4549556aa9462e.png (https://twitter.com/VetleLunde/status/1447949470591770624?s=20)
  
  Here we are looking at the difference of the front month on CME against other exchanges' front month: if negative CME futures trades at discount, the other way round when the premium is positive, as it is now: The CME future has an higher price than other futures: there is more demand for CME futures.
  
  
• CME Open Interest is at historical maximums:
  https://talkimg.com/images/2023/05/15/blob67d48a8ab3b1f815.jpeg
  The buys on CME are kept open overnight: those are not trading positions, meant to be closed intraday, but stay open on multiple days, as signaled by open interest growth.
  Of course the graph here reflects the increased dollar value of the underlying, but the meaning is almost unaffected: open positions are here to stay.
  
  Also the share of Open Interest on CME has grown more than on other we changes: meaning that the open positions held at CME crew quicker than others:
  

  	https://talkimg.com/images/2023/05/15/blobacf65091ab176a2b.jpeg	https://talkimg.com/images/2023/05/15/blob5e80dc89f9283166.jpeg
  	Even if CME has not huge trading volumes, has a steady size on open interest, meaning it is used for more long term trades	Share of Open Interest held at CME has grown substantially in the last few weeks

  
  
  • The annualized rolling basis got steeper and even steeper the competing exchanges:
    https://talkimg.com/images/2023/05/15/blob14264475b03c49e0.jpeg
    
    This means the price of the back month futures grew more than the front month, generating a bigger and bigger price differential and pushing the futures curve more in the contango territory. We have already analyzed how this situation can be used by hedge account to gain a profit without directional risk. If we observe a greater contango then we can think about the fact that the buying pressure is so strong that the curve is pushed upward anyway.
    
  
  
  Where does this observation lead?
  What cause such an excitement in the market?
  
  Well:
  
  https://talkimg.com/images/2023/05/15/blobe5265559e7b0ae51.png (https://twitter.com/josiahtullis/status/1448738758824652803?s=20)
  https://twitter.com/josiahtullis/status/1448738758824652803?s=20

Next week could be explosive……



https://i.ibb.co/V2J0wGZ/185-D950-D-4-B37-49-B7-BE14-8-B9-EACBF0-F03.jpg (https://ibb.co/72jxkD5)
https://i.ibb.co/87bbhYS/CC7-C9988-0-EBB-46-EA-A6-E5-D6-E5-A0-DFB1-E8.png (https://ibb.co/QKkk5D1)

CME futures are cash settled. This means it is more difficult for trader to arbitrage price discrepancies.

Say for example, interest rates, the cost of holding, and the cost of borrowing bitcon are all zero (for simplicity sake). With a "physical" delivery futures contract, the cost of an arbitrage trade would be trading commissions, and slippage when trading both the futures contract and when trading bitcoin. However when a futures contract is settled via cash, an arbitrage trader will need to close his position in bitcoin when the contract expires, which includes  the cost of price slippage when he closes his trade. It is unknown how deep orderbooks will be when the futures contract expires, so a trader will have to guess the cost of slippage when closing the bitcoin portion of the trade, and he will likely need to assume there will be an increased slippage cost in his model to protect himself against losses.

A "physical" delivery futures contract is much easier to arbitrage. If the futures price is above the spot price, he can simply buy spot bitcoin, short the futures contract, pay the trading fees, incur slippage, then transfer his bitcoin from his exchange account to his futures account, and wait for the contract to expire. Or he could buy the futures contract, short bitcoin, transfer the delivered bitcoin from his futures account at expiration to his exchange account to cover his short position, if the futures price is below the spot price.

Obviously, the cost to borrow bitcoin is not zero, and as such, the futures price compared to the spot price will change in part by changes in the cost to borrow bitcoin.

Oh, you spoiled my "suprise".

But it's not surprise as it is well known.

https://talkimg.com/images/2023/05/15/blobae54ab5728d7036f.png (https://twitter.com/EricBalchunas/status/1448738997543612418?s=20)
https://twitter.com/EricBalchunas/status/1448738997543612418?s=20


Complete ETF list:


https://talkimg.com/images/2023/05/15/blobb58291c36ab24783.png (https://twitter.com/JSeyff/status/1448423924044288005?s=20)

This is a pretty good topic to my interest., I've been in the crypto market for a while now and my interest in long-term investing has always been something I'm interested in right now. , i have done a lot of research on futures contracts contracts of many projects including Chng finance this is my project on futures contracts and your topic is very helpful for those who want to learn more about operation and details everything about futures contract.

Totally agree!

Although there is a need for hedging price risk for a future delivery of commodities/goods, such kind of risk does not exist for bitcoin, since it is always delivered instantly in an hour

Futures and options for bitcoin seems to be merely a complicated way of gambling using leverage

After two days of trading, BITO has a little more than 1.2 Billion of AUM.

As of COB of 21 Oct 2021, these were the fund Holdings:

https://talkimg.com/images/2023/05/15/blob87f05e2885ca8cfa.png

they bought an aggregated of 3,812 contracts. As each of them controls 5 Bitcoin, the market value of such a position is right around 1,221,000.

So this position, as expected, almost exactly covers the AUM of the fund.
On the CME website, we discover they hold a large percentage of the Open Interest (essentially, the position held open overnight) of the whole contract:

https://talkimg.com/images/2023/05/15/blob24818528b0f7275b.png (https://www.cmegroup.com/markets/cryptocurrencies/bitcoin/bitcoin.volume.html)

Bear in mind that each account has a position limit of 4,000 contracts (due to be reduced to 2,000 in the last three trading days).

Actually, BITO is the only player in the future market at the CME, and they are forced to buy.
This is reflecting on the measures.
First of all, all this buying sent the curve in contango again. Annualized future basis went crazy again, and cash and carry trades (selling future vs buying spot) are profitable again.

https://talkimg.com/images/2023/05/15/blob3699b9fcdd19ad7f.jpeg

This is certified by the COT documents, which tells us that "Leveraged Funds" accounts are again turning short and shorter in the future

https://talkimg.com/images/2023/05/15/blob1fcd8725e23cada1.jpeg

You see there is a correlation between leveraged accounts short and basis, and the causality flows from the first picture to the second: when the basis is high, those accounts try to profit from it, selling the future and buying the cash. As they sell, the basis compresses, and once they get to their target, they exit the position, closing their short and returning toward a neutral position.

It is much easier for an institutional fund, such as a pension fund or an endowment to account for buying an ETH verses buying a "non-traditional" investment such as a hedge fund (or bitcoin). My guess is there are some investment managers who want bitcoin exposure that cannot account for holding bitcoin directly.

Absolutely. This is the rationale behind the convoluted design of those vehicles.
 Even if I must admit that comparing this EFT to other financial options, like Grayscale (trading at a huge 15% to NAV, or other European ETP, investing directly in cash, looks a suboptimal choice. But I am sure there is a lot of regulatory, fiscal, and mandate constraints on those managers.

Contango is going to killProFunds redditivity according to some analyst:

Contango Conmigo: Why a Bitcoin Futures ETF Could Be a Bloody Ride (https://www.coindesk.com/policy/2021/10/20/contango-conmigo-why-a-bitcoin-futures-etf-could-be-a-bloody-ride/)

There is a Twitter thread, cited in that article, which was very interesting:

https://talkimg.com/images/2023/05/15/blobc65ba630b47cd83d.png (https://twitter.com/AtlasPulse/status/1451228229210099726?s=20)
https://twitter.com/AtlasPulse/status/1451228229210099726?s=20

This measure the price difference of the 3rd and 2nd future, this is another way of measuring the "cost" of holding the futures.

Of course this cost is going to be paid by the investor in the Future ETF, not by the manager.

This is a point worth observing in the next few months, when the ETF's AUM is going to grow significantly and the roll position will grow bigger.

We were talking about the "hidden costs "of a Futures ETF.


Maybe it's too early to call, but here you have a few data points:

https://talkimg.com/images/2023/05/15/blob7b232ef999ffddda.png

Using the 19th of October as a reference, we see that Bitcoin appreciated 5.92%, while the ETF appreciated only 1.47%.
It's an incredible down performance, in such a short period of time.

Will they be able to gain what they have lost?

No. Not unless the futures market sees an extended period of backwardation (https://www.investopedia.com/terms/b/backwardation.asp).

Right now the ETF will see another approximately 1% loss due to rolling from November to December contract (assuming no slippage).

I do believe so.
I am close to replicating the index in the Twitter thread above. I suspect the cost of rolling shoots on the roll dates, but adding 1% cost each month is bad.
Again, bad for the final investor.
All this while the SEC is sleeping.
 

How many ETFs have been launched since the first US approval? I mean, the percentage difference fillippone ^{[5.92% / 1.47%]} mentioned might be the reason ETFs are in a regulated space, so to speak. While Bitcoin and most Bitcoin-related companies are not. I also do not exclude that Biden spoiled the mood of investors with his new bill (https://www.cnbc.com/2021/11/05/house-passes-bipartisan-infrastructure-bill-sends-it-to-biden.html), (although I may be mistaken, since I am not sure if ETF investors can be considered as investors BTC). Btw, I was sorting through my bookmarks and came across a couple of articles, so if no one minds, I'll leave them here for now so that in case of anything I know where to look.

As long as I know only two future based ETF’s have been approved in the US. And both of them suffer from the same negative feature: as they have to scoop CME futures, they are exposed to the specific CME contango structure. I am afraid this is the “price” that you want to pay to have a regulated instrument being in the US, while in other jurisdictions there are cheaper instruments like the BTCE, Who, being physically settled, haven’t this drawback.

I finally managed to replicate that Bitcoin Futures Roll Bleed indicator:

https://talkimg.com/images/2023/05/15/blob4d0139bfa1108cf0.png

Here you have a zoom on the last year.
I believe that 19% overshoot was an intraday move I am not able to reconstruct.

You see the index has been picking up again, together with the contango season.
I have a suspect this index will shoot again on the next roll when the ETF is actively going to lift that very spread.

The SEC rejecting a physical bitcoin ETF, but approving a cash-settled futures ETF is bureaucracy nonsense. Similarly, allowing the Greyscale investment trust to issue shares that cannot be redeemed, but charges a fee for investors to hold is only going to harm long-term investors.

It would be possible for an issuer to be nearly-guaranteed to match the long-term price of bitcoin (or even beat it by a small amount) if they were to invest in either physical bitcoin or physical-settled bitcoin futures, and were to charge a fee to buy or redeem shares directly to the issuer. The issuer could then not charge a fee to holders of the ETF, and the amount of bitcoin each share represents could remain constant (or even increase, if some of the fee is rebated to the ETF) over time.

I am posting here just to make you aware that I opened a "contiguous" thread on the future-based ETF:
Everything you wanted to know about a future Based ETF and were afraid to ask (https://bitcointalk.org/index.php?topic=5374644)

From now on, I will post there analysis on contango, or other ETF-related mumblings.

Market Crash Post Mortem
The last Market Dump that happened last friday, was particularly interesting in my opinion. As far as We can see, much of the action can be traced back to the derivatives market.
A few insightful Post mortem were released, I will analyse here, tring to sum them up and add my own consideration and other material I found in different places.
All relevant links are reported at the end of this post and clearly referenced when used.
 
What happened

Last Friday marked accelerated an already weak price action, and bottomed at 42,020 corresponding to a loss of 39% since the ATH observed on November 9th.

https://talkimg.com/images/2023/05/15/blob973d73970980aa7d.png (https://compoundadvisors.com/2021/7-chart-sunday-12-5-21)

The loss is the 2th biggest fall in BTC terms in 2021 only.
If we put in relations the depth of market correction and the time span of the drawdown we see we are in a mixed situation:

https://talkimg.com/images/2023/05/15/blob995f5e2c94ac62b0.png (https://ecoinometrics.substack.com/p/ecoinometrics-to-buy-or-not-to-buy)

 
Anatomy of a crash
 
As noted in the Glassnode report, the catalyst was the break of the support level of 53K on Bitcoin on the back of traditional financial markets weakness. I am not fully confident this is the whole story, but often things happen in the financial markets without a clear trigger, and in the post-mortem analysis we usually agree on what was the cause of the movement, while it would be important to know it before the movement, but this is a different story. Once this level broke a flurry of market longs liquidations led to an astonishing reduction of OI: in a few hours a reduction of $5.4BLN, equivalent to the 25% of the total value.

https://talkimg.com/images/2023/05/15/blob8ae1c5bc9a32b852.png

At 58,202 in BTC terms, this liquidation was the second biggest in history, after the one in May which topped 79,244 BTC

https://talkimg.com/images/2023/05/15/blob73dff3b6a3c25c6a.png

Notably, thi reduction was pretty much evident outside the CME exchange.
https://talkimg.com/images/2023/05/15/blobaeb0f3d8c6bfd49f.jpeg  (https://twitter.com/laevitas1/status/1467063270314061831?s=20)

The majority of the positions held at the CME are long term ones, as the main customers of this exchange are uber-regulated institutional investors. BITO’s proponents being the biggest of them all holding more than 5,000 futures contracts. Also, the CME being closed helped the poor liquidity of the market, which in turn is one of the reasons why the move took place during a friday night’s lack of liquidity
As the long futures positions were liquidated the funding needed to be paid to keep those positions opened fell sharply. As we have already said in this thread, when the funding is positive, long position holder must pay to keep their position open, while the opposite happens when the funding rate is negative. So, funding rate is a sort of “thermometer” of the imbalance of the future market: when the finding is extreme, this means also positioning is extreme, in one way or the other.
When longs are liquidated, suddenly, all the long retail position gets closed out, so only short position are left in the street so funding turns negative:
 
https://talkimg.com/images/2023/05/15/blobee6eca82fbc68fe4.png

Funding rate turned to -0.035%, the most extreme level in months.
As you can see, the funding premium has been positive since the beginning of October. Prolonged period of time with positive funding means a high level of confidence by the traders about market bullishness. This confidence can soon turns in complacency, that ignores without taking actions against warning signs of a different market scenario.
Another sign of this complacency has been the continuous outflows from the exchanges:

https://talkimg.com/images/2023/05/15/blobfee28e51f79a0880.png

Typically, users keep their funds at the exchange when they are in immediate need of trading, hence when exchanges see outflows this means users are willing to sell (either against FIAT or vs Altcoins) while when an outflow is observed this means users aren’t keen on selling their fund too soon.
Also, as noted by Coindesk, market participants didn’t see that coming, as the implied volatility for 1m expiry options had been flat since weeks at a tad less than 80%. When the crash occurred the volatility squeezed higher to 98% and steadily declined later when the context of the move was much more clear .
How to get warning signals.
 
Elevated funding rates, coupled with non-decreasing non-CME Open Interest and lack of liquidity on the exchange have signalled a certain stance of complacency in the market. This complacency could have led in one or another direction . As things developed, of course the short leg was the one to benefit. Also given the low liquidity on the exchange, market liquidation mechanism resulted in an accelerator of the movement itself, as liquidity was scarce. This makes an obvious recipe to look for another violent measure: Elevated OI are difficult to maintain, if the funding rate get elevated, as those represent the “cost of taking that position”. So those position must be closed sooner or later, either via a liquidation run, or a bull run, when holder naturally close  their positions.
 
 

---

Useful links
 
The Week Onchain (Week 49, 2021) (https://insights.glassnode.com/week-onchain-week-49-2021/)
How Bitcoin Set Itself Up for This Sell-Off (https://www.coindesk.com/markets/2021/12/05/how-bitcoin-set-itself-up-for-this-sell-off/)
Bitcoin's Saturday sell-off (https://theweeklyupdate.substack.com/p/bitcoins-saturday-sell-off) (Paywall)

Interesting development in the futures market.
Future curve in ETH is showing a deep backwardation.

Backwardation happens when shorter expiring futures are trading below spot price, it is the opposite situation of the congango, we have observed many times on the Bitcoin future curve.

https://i.ibb.co/L0K4Tfb/60726084.png

From the graph, you can see from the red line that since the beginning of august the curve has begun to exhibit a steep backwardation, i.e. the first contract has begun to trade at a steep discount versus spot price.


One reason for this can be attributed to selling pressure ahead of the merge, expected to happen on September 19th.
Probably a lot of actors, with underlying long positions that cannot be sold, maybe because
locked in staking platforms, or locked  in validators, are hedging against a future price drop.
So, instead of selling their token, they are selling futures and keeping the yielding tokens, so to be neutral against price movements.

This of course adds pressure on the futures markets driving the curve in backwardation.

This interpretation of “real users selling future” is consistent with the particular fact that even if the backwardation is present on every future market, this is more prevalent in unregulated, or “less regulated” ones, leaving the CME behind.

https://i.ibb.co/sbCk5fW/60726084.png



This, coupled with the tiny open interest on the most “tradfi friendly platform”  means that the origin of this shape is not in the financial market betting against the ETH price.

ETH Derivatives market is getting more focus even in the traditional mainstream.

Bloomberg posted an article looking at options and futures structures just before the merge. They analysed both futures and options market, starting from a note from Glassnode: 

I am reporting here the article, as it is behind a Paywall:

Derivatives Suggest a ‘Sell-the-News’ End to the Ethereum Rally (https://www.bloomberg.com/news/articles/2022-08-12/derivatives-suggest-a-sell-the-news-end-to-the-ethereum-rally)



The suggestion by Zhou means the arbitrageur would borrow ETH, to go long underlying, then short the future (Which would be delivered after the merge as PoS only) and short the PoW future (traded on Bitmex, for example) this would be a delta neutral strategy, with a net positive P&L without any risk (bar counterparty risk).

Future open interest is soaring. All the open positions on the exchanges are topping historical maximums:


https://i.ibb.co/RQM58sM/61109236.jpg

Direction is unclear. There is little tension in the funding market, meaning that future positions are not imbalanced:

https://i.ibb.co/JtRfBNx/61109236.jpg

According to the below graph, positions remain on the long side, as they have remained over the last down leg.

https://i.ibb.co/C7Gmktr/61109236.png


I think this is quite bullish, as the price movement hasn’t caused many positions closure, as per above graph.

In the future market, the collapse of FTX had a few technical consequences, which I will describe in a later post.

One thing is for sure: the biggest exchange, Binance, globbed up the vast majority of the futures market that was trading on FTX. This also probably means that this exchange was actually used only by retails, as finance is a platform rarely used by institutionals.

With this selloff in bitcoin, we saw backwardation for the first time, with a massive flattening in the future curve.

1 month basis has been declining for a few sessions, and it is approaching flat value on major exchanges while has already negative value on many unregulated venues.

https://i.ibb.co/YLkmJwr/61884848.png


Term structure is flattening massively, and even on CME front month is trading at a discount versus spot.


https://i.ibb.co/wh7LFVN/61884848.png

Apparently Gemini wants to fill the void left by FTX:


Seems like a risky move, but Gemini is always keen on moving in the business without disrupting his relationship with the regulators.
We have seen it’s not that easy!

I could title this post "Everything you wanted to Know about cash and Carry but were afraid to ask!

The BIS published this paper about the cash and carry: 50 pages of detailed analysis,

Crypto carry  (https://www.bis.org/publ/work1087.pdf)

This article is really helpful for new trader like me and anyone who has not deeply involved with the futures trading. I am going to be very honest, I find the futures trading very complicated as well as very risky type of trading. It literally makes me think I’m better at HODL rather than lose everything in blink of any eye.

Anyways coming to the point the article seems thorough one. I read through the abbreviations given. This itself clears many facts about the futures and it’s further steps.

As expert in the futures, what steps would you recommend to new trader in the field of Futures trading.

Trading is difficult.
The first lesson is you never lose: either you gain, or you learn something. Having said that, you should trade only with a sum you are allowed to lose entirely.
Never trade with your life savings, and never think that paper trading (trading with fake money) is a good exercise for the real thing.

So, to sum up, my advice would be: to start slowly, be prepared for economic losses, but have a better understanding of the market.

I agree with you.

First don't use life savings for trading because trading is difficult, it's easy to lose all or most of trading capital. If your trading capital is life savings, you will lose rest of your life or will live in pain.

Second, after having good trading capital allocation, not from life savings, it's good if a trader has a plan to gradually withdraw profit to slowly retrieve initial trading capital back. With trading, loss can come anytime but if a trader already retrieve initial capital back, it's fine even he loses profit part.

It's so hard to understand the market and four years or more are needed to understand it. 1 or 2 market cycles that are 4 years or 8 years to understand the market.

Firstly lesson before start with trading have financial dependent or using free fund for trading capital how to anticipate when getting loss with wrong coins for trading, have bad habit with trader brave deposit their saving fund and  most extra ordinary crazy using an illegal loan have higher loan interest for trading capital.

An extremely when joining with future trading without have basic knowledge about risk management in trading, unbelievable with many kinds of trader typical right now not only lack knowledge but also not think forward when getting loss due from saving capital or borrowing funds.

Exactly, honestly I would also say that trading is not easy and very difficult to conquer. But even though this is difficult does not mean you have to retreat and give up, believe me every problem must have a solution and this is the same as trading, although you may be quite difficult in trading but that does not mean it is impossible for you to achieve some profits there. There is absolutely no reason for you to give up if your conditions are favorable, especially in financial matters.

I really agree with your first point, which is that it is true that they should not waste any time not to learn, because the market is volatile so there will always be changes, therefore we must always improve our knowledge in order to stay balanced with the current market conditions, and well for the budget problem it is very appropriate even though you are very excited about the opportunity for large profits but I say the final result will not always be what you want. Therefore as you said, try to always use money that you will be able to be responsible for whatever the results of your trading, meaning that it will not be a big problem even if you experience losses, and of course indirectly it will be able to keep yourself calm.

Good advice buddy, it never hurts to start slowly and it's never too late for something better. The most important thing is that before you start you should consider everything, starting from the budget you will use and also do research for the plan that you think is best and suitable for your trading journey. Finally, don't always focus on profits, but you also need to think about the level of risk, and with that means you should always consider every decision. Not just profits but losses are obviously there too.

Hi @fillippone This topic looks amazing and educational. I would like to be given permission to translate this topic to my local board (Naija local board pidgin) for better understanding of those on my local board.

Negative.
First, you should stop quoting so badly, and maybe learn about basic netiquette and forum rules.
Check here for example:
[GUIDE] Bitcointalk forum etiquette (https://bitcointalk.org/index.php?topic=5136703.new#new)

Second, you are spamming the forum with similar requests, which is not good as there are specific threads for this.
Check here for example:
Help me translate my best posts in your Local Board (https://bitcointalk.org/index.php?topic=5230761)

Third, as you can see in the above thread, you haven't checked the pidgin translation has already been made:
Check here:
Fourth, you haven't even checked your local board about the thread being translated already.
Check here:
 Re: Nigeria (Naija) (https://bitcointalk.org/index.php?topic=5121680.msg60180539#msg60180539)

Very nice thread, I wonder why I haven't seen this thread. It could be because I do not frequent the economics board. But judging from the title of this thread, it ought to be in the bitcoin discussion board. Are there special reasons that the thread is in the economics board?

@Egii Nna, please avoid such method of quoting. It is very horrible to behold.

This thread is very helpful to me because as a beginner that I'm it isn't advisable to just rush into trading in bitcoin without knowing the ethics and techniques to be applied in other to be a successful trader so I've really been able to acquire some knowledge in this thread and I look forward for more thread that will be of more clarity to the comprehension of a beginner