Bitcoin Forum

Bitcoin gets boost as U.S. watchdog approves first swap

TeraExchange on Friday launched a swap based on the bitcoin virtual currency, becoming the first to receive approval from a U.S. federal regulator for a financial product based on the budding

...

It took TeraExchange, which was launched in 2010, almost half a year to get the product past the regulator, the Commodity Futures Trading Commission, since first announcing its plans to launch the swap in March.

The company, one of a handful of platforms to facilitate regulated swaps trading that sprung up after the crisis, had to construct an index to gauge the value of bitcoin that the CFTC was satisfied could not easily be manipulated.


http://www.reuters.com/article/2014/09/12/us-usa-bitcoin-cftc-idUSKBN0H71FU20140912?feedType=RSS&feedName=technologyNews

http://www.teraexchange.com/


posted here because i think thats a milestone for bitcoin, isnt it?



LiteCoinGuy

So many good news lately, wonder when whales will stop keeping the price low to buy as much cheap BTC as possible from morons before the price sky rockets again.

Definitely a milestone for bitcoin, really happy to see so many great things happening and so much good news coming through involving bitcoin and it seems to be happening a lot more often now as well which surely is a great sign?

http://www.finextra.com/News/announcement.aspx?pressreleaseid=56688

Wow, this is huge and can help stabilize Bitcoin price once and for all.

dosn't really mean anything if it does explain it to me

What r u talking about

You are too dumb to understand things like this.  However, I'll tell you one thing you can understand - this is fucking huge. 

Sure bud just answer the question instead of trying to sound like an ass hat

The answer will be of no use to you.  You'll just have to believe that bitcoin swaps are a very important step forward.  It basically means, now wall street is actually involved and designing financial products around bitcoin.  Never before has that been done. 

Look, this stuff is technical.  It's not really good for morons.  Try a Frisbee.

I didn't understand much about this news but if it's huge, it's nice for me and for bitcoins.

Translation:

Brain injury association of America certified WORTHLESS

Don't worry about it dude - just put one of these in your car window:
http://www.clker.com/cliparts/9/u/7/b/Y/V/handicap-logo-hi.png

Now your explaing the currency swap exemption properly

So this swap is an agreement to sell bitcoin at an agreed rate in the future, right? Does it mean merchants who accepts bitcoin do not need to sell the bitcoin they received on the exchange immediately?

WOOT WOOT

Yes. This is a crucial step towards stabilizing the exchange market and turning Bitcoin into a viable currency instead of an investment currency. Additionally, if these swaps are heavily used, they could create significant upward price pressure for BTC by forcing the market into a longer position and therefore able to price in externalities like deflation, and the demand increase for BTC at higher valuations (wire transfers for large corporations which exchanges cannot currently handle due to the limited market.)

Keep your eye on these swaps, they could serve as a tipping point.

You can get more information here, instead of having that kid posting handicap signs call you an idiot: https://en.wikipedia.org/wiki/Swap_%28finance%29

Or a simple explanation here: http://www.investopedia.com/articles/optioninvestor/07/swaps.asp



tl;dr: Bitcoin's real value is in the future, not the present. Swaps = Long positions = Long term upward price pressure = Good.

Disclaimer: Please note that I am not necessarily saying that the current $470 price is 'good' by extension, Bitcoin could (still) be overvalued and a market correction could suppress any short term swap benefits.

That's all correct. Bitcoin could end up with a decreased USD exchange rate initially but the long term growth would be impressive and steady. We could look forward to real adoption by normal people not just the fringe element that uses it inbetween their posting of handicapped signs.

Technically this is true. However someone selling a futures contract to sell something in the future generally has the same effect on the "spot" market as an outright sale would have.

This is exactly what I once proposed, dedicating a thread to such, but was shut down (not the thread) via a myriad of posts espousing as to why my idea would never come to fruition.

My electronics teacher in high school ('76) told me that there would never be a TV watch due not being able to manufacture a cathode ray tube small enough to create such a thing after I asked a "what if" question. He was somebody I looked up to at the time. Image the possibilities if he would have said something akin to, "That's a great idea, Bruno. Why don't you try to build something like that, but probably not based on a CAT."

Look at my sig. Does that also look like a crazy idea?

~Bruno Kucinskas

That actually sounds like another very risky investment vehicle or tool to me! Aren't swaps basically used for leveraged or margin trading? I only see all those swaps over on Bitfinex, where people lend their money to others and they get wiped out afterwards, lol!

Forgive me if this is a stupid question, but shouldn't this help the approval process for the Winklevoss ETF?  I would think this is another step towards showing how this is a legitimate investment.  

this will do nothing to speed up the approval

but the FUD about it not being approved at all should stop.

What are the latest news on the COIN ETF, anyways? There have been rumors that it is stalling or may get cancelled completely!? Is this true or is this just plain and simple FUD, really?

the chance's of someone delivering Bitcoin at below market rates just because they have signed a futures

contract could still be fantasy,

"had to construct an index to gauge the value of bitcoin that the CFTC was satisfied could not easily be manipulated"

this is just fancy terminology to say Terra had the money/connections to pay for CFTC approval,

All exchanges will rise and fall together,

sure if they want to have a gauge that extrapolates out 6 months to provide an average please

go back up to the first line I wrote,

Good on Terra for doing it and we wish them well for investing in Cryptocurrency.

TeraExchange Receives US Approval to Launch First Bitcoin Derivative

http://www.coindesk.com/teraexchange-bitcoin-derivative-cftc/

I think this does a ton to help Bitcoin be more widely accepted and it helps legitimize it more so in the eyes of those who've been sitting on the sidelines.  They are probably tons of people who are unsure what Bitcsoin is really all about and now they have more of a reason to look into it.  They likely won't but hey it is what it is.

There are no exchange of bitcoin at all in this swap - it's all in USD. You guys are talking about a future contract.

This is more like your Costco price warranty. You have Bitcoins today but if it's worth less in a year, you get the difference. However, in the case of the swap if it's worth more then you pay the difference. Also, the reference may not be today's price as long as both parties agree to it.

This is terrible news. It is all about TPTB taking control of BTC.

News flash: Wall Street is a criminal enterprise. They will make a mess of it and dictate the price. Look at what they have done to gold and silver with their fake metal ETFs and their rehypothecated shit sales of metal. They will sell the same Bitcoin to different entities all at the same time, and they will do this, because it will be outside of the blockchain. They will shuffle bitcoin to the entity that is being audited to make the books jibe.

These cocksuckers will control the market and control the price. It is huge alright. It is a huge fucking disaster.

Jump you fuckers!

http://www.youtube.com/watch?v=yge311sFhC8

At this day and age any news is good for bitcoin especially watchdog groups we need to stay relevant.

I think so. But you have to pay for the facility.

translation:

I want to sound smart by calling you stupid, but the truth is I do not understand it myself either.

i'm not an expert on this subject, but i think there is a few crucial differences that make the pressure less harmful.

1) The sell is in the future, meaning the market has more time to respond (either positively or negatively)

2) If the seller would agree with the current price, he would have sold outright, but clearly the seller is hoping the price will improve in the timeframe of his contract, therefore, the intended selling price is higher than an immediate sell, therefore even though there is sell pressure, it's not like they want to sell it 'at any cost' like a market order.

All in all future contracts do drive the price down, but not the same as a market sell.

The person selling the bitcoin would need to put up some kind of collateral to enter into the agreement. As the price is less favorable to the seller, more of the collateral is taken from them. If the level of collateral falls below a certain level then the account would automatically enter into a buy futures transaction to unwind the sell transaction (individual contracts are fungible)

It's not a future contract but a swap. The margin calls do not work the same way.


Someone asks if it's like a future and then a bunch of people reply "yes". Now this thread assumes it's a future. No offense but this is how misinformation is spread.

when reuters write about bitcoin it must be big news

If someone were to sell a futures contract to sell 1 BTC then someone else will need to buy a futures contract for 1 BTC. When they enter into this contract the buyer would now not buy the 1 BTC they would otherwise buy on the spot market. The buyer would still have all the benefits of owing the 1 BTC except for being able to spend it on the network until the contract expires and the 1 btc is delivered

This should have a positive effect on Bitcoin. Bitcoin rules 8) 8)

We called TeraExchange- the minimum trade size is $1M USD and only eligible contract participants (http://www.iso-ne.com/committees/comm_wkgrps/prtcpnts_comm/ftr_lttr/mtrls/may232008/eligible_contract_participant.pdf) can trade the swap.

This is great news for those that have large mining operations, companies with a lot of flow like Coinbase and a step in the right direction for the trustworthiness of Bitcoin trading as this is the first regulator outside of the money transmission world to approve a digital currency product. Counter-party risk, a mainstay of the digital currency trading industry, will hopefully be eliminated for traders as more products get approved. In addition, this is good news for the ETF as the SEC and CFTC have similar regulatory mandates.

I don't understand, what is going on? A swap?

derivatives man. This is really good news. Small merchants might fear doing business in bitcoins because the effects of price fluctuations far outweigh the profit they make from the sale. Let's say I make a deal to sell you 9 gallons of industrial solvent in 9 months. You agree to do the deal for X bitcoins. Without swaps I'm now exposed to price risk for the next 9 months. if bitcoins drop in value relative to the USD I can end up losing money on the deal. Now that I can swap I can sell someone the promise of your X bitcoins in 9 months for a cash amount that's decided today and now I don't need to worry about the price of bitcoins because I'm no longer exposed to the risk.
Swaps and derivatives are a big part of what makes international currency markets work too since it give vendors more options to deal with clients from countries with volatile currencies.

Derivatives also increase your options for handling bitcoins. If Puts and Calls become possible, then you can start constructing positions that profit when the price is volatile in either direction or other helpful setups. Derivatives themselves are a zero-sum game by design but they can add a lot of flexibility to the main market they support

These types of agreements (buying certain products over long periods of time) is more typical of business to business transactions and so far there is little to no market for these kinds of transactions. Before long term b2b transactions involving bitcoin will start to happen, b2b transactions involving bitcoin for intimidate delivery and payment will need to come first. I think at first the swaps/futures contracts will be used primarily by speculators, however over the longer term it may be used in the way you describe

Basically a more advanced form of currency exchange. See here for more info:
http://en.wikipedia.org/wiki/Currency_swap
Pretty awesome that a US regulatory body is putting its rubber stamp on a bitcoin-based financial derivative.