Why i think the CME listing Bitcoin Futures is actually a bad thing!

[thecodebear]

Bloomberg has an article about hedge funds itching to short bitcoin:

https://www.bloomberg.com/news/articles/2017-12-04/the-next-big-short-hedge-funds-prepare-to-trade-against-bitcoin

A bitcoin big short is building.

The planned introduction of bitcoin futures contracts at CME Group Inc., Cboe Global Markets Inc. and Nasdaq Inc. will make it much easier to bet on a decline. Hedge funds, which have largely stayed on the sidelines, are waiting for the Chicago Mercantile Exchange’s futures market to open for a fresh opportunity to bet against the cryptocurrency, according to more than a half dozen people trading the assets.

“The futures reduce the frictions of going short more than they do of going long, so it’s probably net bearish,” said Craig Pirrong, a business professor at the University of Houston. “Having this instrument that makes it easier to short might keep the bitcoin price a little closer to reality.”

Read that already. Doesn't change the fact that futures are cash settled. They still have to first buy into bitcoin in order to crash the price = bullish!

Not worried in the slightest.

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[Syke]

Bloomberg has an article about hedge funds itching to short bitcoin:

Rekkage incoming...

[Slark]

"it is now very invietable that the bitcoin markets "spot" and futures will be heavily manipulated which may lead to a nosedive"

True to that - I completely agree, and guess what? It is totally and absolutely inevitable future, there is no way that power-that-be will miss that opportunity to get even richer.
Bitcoin was, is and probably always will be prone to any kind of manipulation, if there will be organized movement or rich enough individual - the price might be manipulated with ease.

And I also acknowledge - introducing bitcoin options and futures will bring the first real chance to short bitcoin, since you could bet on the price going down too. But again, we can't do anything about it.

[thecodebear]

Are you guys not realizing that the futures market is cash settled? No bitcoin will be exchanging hands. There will be no selling of bitcoin in futures no matter how much they short. All they are doing is betting on the price. It won't affect the market at all. It's just a way for Wall St investors to make and lose money against other Wall St investors without actually getting into Bitcoin because they don't want to deal with crypto exchanges. They stick to their regulated Wall St exchanges where they don't put their millions of dollars at risk of being hacked or dealing with the limited withdrawal policies of crypto exchanges.

[MarquiseMuseum]

Are you guys not realizing that the futures market is cash settled? No bitcoin will be exchanging hands. There will be no selling of bitcoin in futures no matter how much they short. All they are doing is betting on the price. It won't affect the market at all. It's just a way for Wall St investors to make and lose money against other Wall St investors without actually getting into Bitcoin because they don't want to deal with crypto exchanges. They stick to their regulated Wall St exchanges where they don't put their millions of dollars at risk of being hacked or dealing with the limited withdrawal policies of crypto exchanges.

So a hedge fund betting a few billion on bitcoin $1000 in 6 months would not be incentivized to somehow get a hold of a huge pile of real bitcoins or borrow it from someone who has? Cash settlements is even worse because profit is decoupled from the crypto market and taking up strategic positions in actual coin to manipulate prices could prove a drop in the ocean compared to cash profit. There's only $120m buyside to $1k bitcoin, order depth isn't a measure of demand but on a $200bn asset you'd expect a little more. The crypto space relies on unconventional value signals to determine price points, it's easy to buy influence in the right channels to propagate an agenda, bitcoincash was a well coordinated example of this. Bitcoin is highly susceptible to crowd psychology and they are targeting the most controversial crypto of the lot backed by threats of congress regulation/fbi/atf/homeland security anti money laundering/terrorism sentiments and a discontent public at large who were sidelined and only wish to see bitcoin crash and burn. What small investors dont comprehend right now is that there will be a proverbial 800 pound gorilla (or bear I guess) with a stick on the sell side starting december 10 (earlier than I thought) which until this point wasn't there before. Covering a short position is no big deal, simply start over on a higher price, there will be constant selling pressure going forward to test the market for price discovery and force weak hands out of positions, this is their bread and butter, you can't win. I was there in biotech, it's like running into a brick wall over and over as a small investor, long investors needn't apply i'm addressing people like myself who see short term opportunity in bitcoin, I think long term investors bullish on bitcoin is facing a different set of fundamental challenges, as long as one is not all in on bitcoin atleast it won't ruin you.

https://hbswk.hbs.edu/item/the-problem-with-hedge-funds
https://www.thebalance.com/how-do-hedge-funds-impact-the-stock-market-3306238
http://business.financialpost.com/investing/the-next-big-short-hedge-funds-ready-to-bet-against-bitcoin-1

Bloomberg has an article about hedge funds itching to short bitcoin:

https://www.bloomberg.com/news/articles/2017-12-04/the-next-big-short-hedge-funds-prepare-to-trade-against-bitcoin

A bitcoin big short is building.

The planned introduction of bitcoin futures contracts at CME Group Inc., Cboe Global Markets Inc. and Nasdaq Inc. will make it much easier to bet on a decline. Hedge funds, which have largely stayed on the sidelines, are waiting for the Chicago Mercantile Exchange’s futures market to open for a fresh opportunity to bet against the cryptocurrency, according to more than a half dozen people trading the assets.

“The futures reduce the frictions of going short more than they do of going long, so it’s probably net bearish,” said Craig Pirrong, a business professor at the University of Houston. “Having this instrument that makes it easier to short might keep the bitcoin price a little closer to reality.”

Read that already. Doesn't change the fact that futures are cash settled. They still have to first buy into bitcoin in order to crash the price = bullish!

Not worried in the slightest.

Already bought or will borrow, no need to buy.
These titans don't enter on ath, futures is rigged wouldn't happen if w:st couldn't benefit already, expecting a big push upwards to let crowd psychology kick in before going to work. Even if hedge funds ride in on a white horse to buy everyone out it's a calculated move and price to pay to gain control of the golden calf, cut the head of the hydra, bitcoin is a systemic risk to the status quo, remove confidence in bitcoin = triumph. This is war to high street if you haven't been paying attention, big enough for the privilege of becoming another casualty of the masters of the universe, ripe for the slaughter. Same guys who muscled in on Lazard when our cousin was raking in $100m per in private salary for a short time in the late 90s blowing cigar smoke in UBS face from his top floor office on rockefeller plaza without a single f*k given, well that didn't last long and he saw an 85% decline in private assets over a period of years after Lazard was subject to a hostile takeover. Color me sceptical.

[thecodebear]

well we'll just see how it plays out i guess haha. I for one am not worried. Futures aren't gonna suddenly stop the exponential increase in user adoption and price. If anything it'll get people more interested. They can try to control it. We've got tens of millions currently in Bitcoin and there will be hundred of millions more people getting into it in the next few years. Can Wall St control a capped supply where most of the supply is already gone and not selling to them and tens or likely hundreds of millions of people moving in to the market over the next few years to get their own piece of that supply. Not too mention plenty of people on Wall St don't want to short but in fact want to go long. Despite all the doom and gloom talk of some people, I'm not worried in the slightest.

[MarquiseMuseum]

This is an interesting alternative interpretation on introduction of futures from one commenter, it would support bullish momentum prior to peak but its getting hard to pinpoint exactly at what point that will occur, small investors should take profits of 25-50% at 200-500% upside and let it run from there my proposition:

https://www.cryptocoinsnews.com/bitcoin-price-will-hit-20000-before-tanking-financial-expert/


No, you're not understanding real economic bubbles.

Tulip bulbs in the 1600s traded normally as a luxury commodity for years. It was only when derivative instruments were introduced (tulip futures and options) that speculation went rampant. 1920s stocks reflected rational investment in the emergent electrification of the nation, until excess leverage provided by the banks allowed 10x or higher leveraged positions. The 2008 debacle was fueled by Collateralized Debt Obligations and Credit Default Swaps - more derivatives offering excessive leverage.

Are you starting to see the pattern? True bubbles occur when the presence of leverage either directly or through derivatives becomes excessive. So right now what we have is likely the start of any bubble since futures trading is just beginning later this month. Only after the futures desks are filling orders at a clip and bitcoin options are a thing will we likely have crossed over into true bubble territory.

[fabiorem]

They still have to first buy into bitcoin in order to crash the price = bullish!

They are already buying. Why do you think theres no correction right now? Its only green candles, they are buying all orders up.

People should stop selling for a while, decrease the volume on the exchanges. There should be some way to protect against what they are planning to do.

[thecodebear]

They still have to first buy into bitcoin in order to crash the price = bullish!

They are already buying. Why do you think theres no correction right now? Its only green candles, they are buying all orders up.

People should stop selling for a while, decrease the volume on the exchanges. There should be some way to protect against what they are planning to do.

hahaha so much doom and gloom about futures that you all forget whats going on.

You say there's no correction right now...uhhh we literally just had a correction last week!
So what in the world are you talking about?? In fact we've had TWO corrections in the past month!!

I would say its the massive influx of new users that are buying up all the Bitcoin. Coinbase new users are absolutely booming since futures were announced about 6 weeks ago. On two separate days Coinbase has added 100,000 users in a single day!

I think all you doom and gloom type people just need to sit back for a few weeks and let futures start and no it isn't the end of the world, Bitcoin will be just fine and the next 10x march to $100k will continue.

[Wind_FURY]

Bloomberg has an article about hedge funds itching to short bitcoin:

https://www.bloomberg.com/news/articles/2017-12-04/the-next-big-short-hedge-funds-prepare-to-trade-against-bitcoin

A bitcoin big short is building.

The planned introduction of bitcoin futures contracts at CME Group Inc., Cboe Global Markets Inc. and Nasdaq Inc. will make it much easier to bet on a decline. Hedge funds, which have largely stayed on the sidelines, are waiting for the Chicago Mercantile Exchange’s futures market to open for a fresh opportunity to bet against the cryptocurrency, according to more than a half dozen people trading the assets.

“The futures reduce the frictions of going short more than they do of going long, so it’s probably net bearish,” said Craig Pirrong, a business professor at the University of Houston. “Having this instrument that makes it easier to short might keep the bitcoin price a little closer to reality.”

Read that already. Doesn't change the fact that futures are cash settled. They still have to first buy into bitcoin in order to crash the price = bullish!

Not worried in the slightest.

Yes this.

What they are really doing is trading "contracts", the same way how Etoro users are trading CDF instruments. All they are doing is making calculated risks on the price movement of Bitcoin, not buying and selling actual coins.

Everything is also settled using the price from Gemini. https://gemini.com/

But if they truly want to short sell Bitcoin, they will be in hell in trying to figure out why it keeps rising.

[TERA2]

The only reason cme futures is bad is because when the sec cancels it, btc will tank hard. But if there were never the future's tease, it wouldn't be a big deal and btc would quietly be making an uptrend past $5k.

[fabiorem]

Bitcoin is not a corn or other material thing, why should futures make it more valuable?

It will not. What it will do is to turn bitcoin even more volatile than what it is now. Pumps and dumps will be massive due to money flowing from hedge funds.

[adamantasaurus]

hmmm so what do you guys think will happen and the better question how fast will it happen will it be like by monday the price will dump because of all the shorts and then raise and then dump again? Or will it take some time like a few weeks or so? I don't really know what futures are and didn't know anything about the stock market world until I got into crypto

[PricklyPear1]

My post is predicated under the assumption that the volume of futures trading will be larger than the volume of BTC exchange trading someday in the future. This assumption makes it slightly more likely that a futures market has the ability to influence exchange rates due to margin.

Two examples: 1) trading in a futures market and 2) trading on an exchange

Ex 1. If a futures contract begins to go negative, the contract holder must either decide to 1) close out at a loss or 2) add more cash to the account in order to satisfy margin account requirements. With this is mind, all futures holders would have to decide which option to choose. This decision could create the possibility of momentum if the exchange rate were to change.

Ex. 2 When trading on an exchange, the holder doesn’t have to make these types of decisions at one time. Rather, a holder can decide when to buy or when to sell their position.

From a futures market standpoint, a lot of trading involves stop loss and TA strategies. This also happens to some extent in exchange trading. This creates a large pool of participants in both markets that behave in accordance to expectations of how “others” in the market are (and newcomers will also) behave. With the large plethora of TA information bought and sold between companies, this creates the expectation of price movement. The results of this are often additional futures purchasing and exchange rate fluctuations that either precede or follow actual decisioning made by participants.

From an exchange standpoint, the interaction with futures markets enable arbitrage opportunities. Since participants in these markets do not behave in a solo manner (only futures or only exchanges), this creates opportunity to buy on one platform and sell through the other. The net of this behavior keeps futures markets and exchanges tied together closely.

At least with respect to present day currency futures and exchanges, there is a general relationship between volume of futures trading and exchange prices. This doesn’t suggest causation, but it does suggest a strong correlation. Another way put, if BTC prices on the exchange are highly volatile, we might see a huge increase in futures trading because of the speculation interest. More futures trading, more price volatility on the exchanges.

In conclusion:
1) Futures markets and exchange market participants have different decisioning that influences market behavior and price
2) Futures markets may significantly alter BTC exchange rates for as long as futures trading volume is higher than exchange trading volume.
3) Over time, the futures markets and BTC exchanges will become more intertwined resulting in less volatility between the platforms

Final comment: Once the futures markets open, price volatility will stay rather consistent and will correlate positively with good news and upbeat market sentiment. As these interactions between futures markets and exchanges mature (also as BTC availability decreases), volatility will decrease.

[viswanth7]

OP had a very valid doubt and his speculation on November is proving to be true. BTC price is being manipulated heavily.
CBOE bitcoin futures already proved OP's doubts on Jan 16th and we all know where it took us and now comes CME's on Jan 26th. Will BTC price dip again?

[partyush]

did you heard Coinfloor to launch the first physically delivered bitcoin futures??
Check this out: https://coingape.com/coinfloor-offer-physically-settled-bitcoin-futures/