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Author Topic: [2017-11-02] Bitcoin Futures — Here's What That Means  (Read 1215 times)
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November 02, 2017, 02:42:30 PM


CME Group, a leading marketplace for derivatives which handles 3 billion contracts worth about $1 quadrillion annually, is set to roll out bitcoin futures by the fourth quarter. A bitcoin future will allow investors to bet on the future price of bitcoin without having to actually hold the coin itself. It could bring more Wall Street firms into bitcoin and other cryptocurrencies.

Futures, which allow two parties to exchange an asset at a specified price at an agreed upon date in the future, have been around since the late 19th century.  They are traditionally traded by professional investors and firms. CME, trades futures based on everything from oil to corn. In some cases, when a futures contract settles the buyer of the contract can receive their payment in the product itself (a barrel of oil, say), or in cash.

The latter are referred to as cash settled futures. For instance, an investor can buy a future for a commodity like oil betting that its price goes up at a certain point in time. Let's say oil is trading at $50 right now, and the investor thinks the price is going to go higher. They might buy a future to buy oil at $55 a month later. If the price of oil is $60 when the contract expires, they get the $5 difference.

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We are definitely entering a very interesting phase for Bitcoin as investors are now also given another alternative to get into it: the futures!  As this has been around for a long time now, am sure that Bitcoin futures can be accepted by the mainstream investing public and the way for the Wall Street guys to get into digital currency without them owning one. Now, Jamie Dimon should not be complaining anymore as he can now buy all the futures that he wants (he can bet that Bitcoin would be worth zero like one year from now, what about that?). 

I don't pretend to be so familiar with all the investment jargon but am trying to learn every bits of necessary information most especially connected with Bitcoin. So this can become another arena we Bitcoin enthusiasts have to be familiar with. Now, this is the the present Bitcoin is maintaining its energetic climb to the $7,000 mark and corrections are not yet on sight (though they might be coming abruptly anytime).
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November 02, 2017, 03:34:49 PM

The way I see it, these guys are playing with margins and the difference between paying for a coin now and promising to buy

one in the future. So at some stage they will be buying a coin, but it will be at a much lower price than what it is trading on

the open market. They determine what the future price would be and then they pay the difference daily { above or below

what it is trading for daily. } Can someone explain this in a bit more detail please?

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