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December 17, 2017, 01:35:36 PM |
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Now that CBOE and CME are trading Bitcoin futures, there was hope it would push the price of Bitcoin higher. There is, however, no direct link between the futures being traded and the Bitcoin price. The reason for this is Bitcoin futures are cash settled. There is never a point where the expiration of a contract will ever involve the exchange of Bitcoin, so the trading of futures is an artificial tracking of the Bitcoin, just in a more regulated setting. This may give institutional investors more confidence than dealing with unregulated crypto exchanges, but it doesn't mean anything for the price of Bitcoin (directly).
It remains to be seen if Bitcoin futures can indirectly affect the price of Bitcoin. Because there is no settlement in Bitcoin, futures contracts cannot affect supply for sale and demand directly, but if futures traders bid the one-month futures settlement price up $5,000 above the Bitcoin price, it remains to be seen if this will translate into increased confidence for the actual Bitcoin market and lead people to buy more and also push the price up. This is the only way futures can affect the price, indirectly.
My expectation is that because there is no settlement in Bitcoin and settlement has no direct ability to influence price, the futures will not trade wildly differently from the actual price at any given time, and any indirect affect will be negligible. With the volatility of Bitcoin, futures traders will never be able to speculate too far ahead of the actual price because of the speed at which the price can change and leave them on the hook for settlement of an asset they won't even be able to take control of if they bet wrong, but must simply settle in cash for a loss.
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