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Author Topic: The impact of futures trading on commodities and my worry for BTC  (Read 338 times)
pinkflower
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December 02, 2017, 02:16:31 AM
 #1

First you should read this introduction about futures pricing on commodities.

Who sets the price of commodities?

Here are some important notes from the essay.

  • Since commodities are traded on exchanges, their prices are not set by a single individual or entity. On the exchanges, commodities are traded via futures contracts.

  • The market price of a commodity that is quoted in the news is often the market futures price for that respective commodity.

  • Although commodities are traded using futures contracts and futures prices, events that occur now will affect the futures prices.

  • As with other securities, many traders use commodity futures to speculate on future price movements.

What are we seeing here? Are the exchanges that trade real BTC being moved aside and pushed away by the CME Group and other regulated exchanges now?

From my perspective, the futures markets are slowly taking over and years from now holding a futures contract for BTC will be more valuable as a fiat earning investment then holding BTC itself.
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pinkflower
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December 04, 2017, 01:29:38 AM
 #2

I am very surprised by the forum's lack of response! Maybe its because no one understood my post or no cares that the CME's futures market will possibly be the spot market for basing BTC's price on.

They are taking over and that should be a red flag for us.
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December 04, 2017, 02:03:32 AM
 #3

Like you, I'm a bit worry about bitcoin futures. It is hard to realize what will be the consequences. I see it as a way to "centralize" bitcoin (hope I'm wrong).
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December 04, 2017, 06:54:43 PM
 #4

When the author of this essay says this 'The market price of a commodity that is quoted in the news is often the market futures price for that respective commodity.' I think that they're saying that when an analysts marks what the price should be of a commodity, it is going to levitate towards that as they (normal average people) think the experts know what they're doing so it will gravitate towards that. This'll be the fate of Bitcoin if it fully changes to a commodity instead of a currency.

Lets hope we don't go to this.

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December 04, 2017, 07:08:33 PM
 #5

I am very surprised by the forum's lack of response! Maybe its because no one understood my post or no cares that the CME's futures market will possibly be the spot market for basing BTC's price on.

They are taking over and that should be a red flag for us.

I agree that this is something to be concerned about. Someone else started a topic about this earlier and everyone thought this would be good for Bitcoin because more investors would be participating in the Bitcoin economy. I expressed my concern that this could actually cause price manipulation.

I’m not an expert on futures markets so I could be wrong but if the market doesn’t actually own Bitcoins but is selling them, then doesn’t that flood the market with more sells than there should be? How many are they allowed to sell? My assumption is that they have to at least own a small percentage of Bitcoins in order to sell but even if that’s the case, they are selling something they never had to buy to begin with.
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December 04, 2017, 07:15:19 PM
 #6

I agree.  Bitcoin's emphasis on financial sovereignty makes it very important for people to be trading real BTC at all times and to withdraw it very easily at will to a wallet that they control.

It's also a problem because it could cause significant price manipulation, since there's not a lot to prevent the BTC price from being manipulated.

It could also make speculators who are joining in quite late into the BTC market speculate even more feverishly than before.
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December 04, 2017, 07:15:41 PM
 #7

Without a doubt publicly traded futures will have a huge affect on the future prices of bitcoin. Most importantly they will change the volatility of the coin. Hopefully it makes bitcoin a lot less volatile. I know that might sound horrible to some of you traders out there, but less volatility actually makes it a more viable currency for using and investing.

It also means that another avenue for arbitrage opens up. This will help keep bad news from completely obliterating the price of bitcoin in minutes. The arbitrage between the futures price and the current price creates a floor (or a ceiling) on rapid price movements. Right now if there is some bad news, it is easy for bitcoin to drop 20-40% in an hour, obviously this is unacceptable for a currency and even for an investment sold to the general public.

I think it's good news and will lead to broader adoption of bitcoin from regular people. They may not invest in bitcoin directly, but if you can buy some bitcoin futures and put them in your IRA back by a real bank - a lot more people will get into bitcoin. I can't wait for some altcoin futures!
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December 04, 2017, 07:36:15 PM
 #8

The goal of BTC is to be a currency, not a commodity, so I don´t think futures will replace holding BTC, but just be different.

Listing BTC on big exchanges will bring more investors -> price increase

And you can´t really centralize BTC with futures (trading with futures is centralized but it doesn´t disable decentralized usage of BTC), you would have to either control a majority of nodes and/or miners to have a serious impact.

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December 04, 2017, 08:38:59 PM
 #9

Nah you shouldn't be worried because ultimately they will still have to use BTC price point for entry and that can't be drastically reduced because they want it. Sure the price and those funds will be in the news more and that could effect price heavier than the average person can but doesn't change the fact they don't make the rules. The laws of supply and demand do and knowing the demand is way higher than supply should have you feeling okay. I am looking forward to it in fact and think the price rise will coincide with the funds coming along with bitcoin finally.

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December 04, 2017, 09:26:55 PM
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I really do not harbour any fear about that. Bitcoin is decentralized and a very strong means of exchange whose usefulness and demand beats imagination. So, is still going to be in high demand and even more useful.

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December 04, 2017, 09:47:18 PM
 #11

I am very surprised by the forum's lack of response! Maybe its because no one understood my post or no cares that the CME's futures market will possibly be the spot market for basing BTC's price on.

They are taking over and that should be a red flag for us.
Maybe most of the people here doesn't that read much when it comes to this type of news and happenings. I'm a bit worried about this CME's futures market. Instead of adding more investors for the marketcap of bitcoin, they can just use futures and invest on it and speculate while earning not directly with bitcoin. AFAIK, it will be different and I guess you are right on this part.

the futures markets are slowly taking over and years from now holding a futures contract for BTC will be more valuable then holding BTC itself.

pinkflower
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February 11, 2018, 04:37:26 AM
 #12

Nah you shouldn't be worried because ultimately they will still have to use BTC price point for entry and that can't be drastically reduced because they want it. Sure the price and those funds will be in the news more and that could effect price heavier than the average person can but doesn't change the fact they don't make the rules. The laws of supply and demand do and knowing the demand is way higher than supply should have you feeling okay. I am looking forward to it in fact and think the price rise will coincide with the funds coming along with bitcoin finally.

Revisiting this topic after 3 months, we can now have a good view of what has happened and whats happening. The futures market turned out to be not so good after all. Traditional investors have been short selling the futures market and been making their media minions spread FUD at the same time.

To make money, Wall Street now has to manipulate the market from now on.
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February 11, 2018, 07:45:06 AM
 #13

Commodities are legally contracted by people and with the approval of government law. In bitcoin, I don't think if the contract you are mentioned are surely done. Bitcoin is really a mysterious thing that no one can site and gave the proof of the person which we want to send a contract letter. And even in a personal identity, no one can determine that person is called the  creator of bitcoin.
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June 09, 2018, 02:47:51 AM
 #14

Going back to this thread to have more discussions about this. Some maybe have already found solid evidence that the futures market for BTC may have also made a negative impact on the price on the market after months of its existence.
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June 09, 2018, 07:13:02 AM
 #15

The goal of BTC is to be a currency, not a commodity, so I don´t think futures will replace holding BTC, but just be different.

Listing BTC on big exchanges will bring more investors -> price increase
I agree with your opinion, Bitcoin is created to be the currency of the future not for commodities, but what is happening now Bitcoin is like a commodity trading, but unlike that, Bitcoin prices are soaring because of very high demand, while bitcoin is created with limited inventory, I think we should not be afraid of all the news that has spread, Bitcoin has survived nearly 10 years and during that time Bitcoin keeps growing and growing for the better.
And you can´t really centralize BTC with futures (trading with futures is centralized but it doesn´t disable decentralized usage of BTC), you would have to either control a majority of nodes and/or miners to have a serious impact.
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