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Author Topic: Kitco's new daily chart alert  (Read 173 times)
Jet Cash
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January 11, 2018, 04:09:27 PM
 #1

Jim Wycoff has started a new daily chart alert for Bitcoin prices and trends. Today's chart is here -
http://www.kitco.com/news/2018-01-11/Bitcoin-Daily-Chart-Alert-Technical-Damage-Mounting-Jan-11.html

I started this thread because the creation of Bitcoin futures trading sites, and the consequent derivatives market, is going to affect Bitcoin's future. It may also leave the way open to price manipulation via contracts where physical delivery is not an option.
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January 12, 2018, 08:47:45 AM
 #2

I started this thread because the creation of Bitcoin futures trading sites, and the consequent derivatives market, is going to affect Bitcoin's future. It may also leave the way open to price manipulation via contracts where physical delivery is not an option.

The futures are cash settled at prices derived from crypto exchanges. How does the lack of physical delivery make any difference?
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January 12, 2018, 09:27:05 AM
 #3

I started this thread because the creation of Bitcoin futures trading sites, and the consequent derivatives market, is going to affect Bitcoin's future. It may also leave the way open to price manipulation via contracts where physical delivery is not an option.

The futures are cash settled at prices derived from crypto exchanges. How does the lack of physical delivery make any difference?


If physical delivery isn't a requirement, then it's easier to push the price down . This allows you to buy the commodity in the physical market at a reduced price. It's what the bankers have been doing with gold and silver. I believe there is something like 100 times as much gold sold on paper as exists in the whole world in physical form.
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January 12, 2018, 09:44:13 AM
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If physical delivery isn't a requirement, then it's easier to push the price down . This allows you to buy the commodity in the physical market at a reduced price.

How does that push the price down? The cash settlement means that if there is a discrepancy in price then someone is sure to arbitrage it in exactly the same way as they would a physical delivery market. I could understand arguing that the market with the highest volume could push the price, and that certainly isn't futures, but I cannot see any connection to physical delivery.

It's what the bankers have been doing with gold and silver. I believe there is something like 100 times as much gold sold on paper as exists in the whole world in physical form.

So the market with the highest volume leads price.
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January 12, 2018, 10:08:44 AM
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So the market with the highest volume leads price.


That's the problem - you push the price down with paper gold, and then buy physical gold at a discount. It's because of this that China has introduced a new gold price fixing exchange based on physical sales.
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January 12, 2018, 10:10:34 AM
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That's the problem - you push the price down with paper gold, and then buy physical gold at a discount. It's because of this that China has introduced a new gold price fixing exchange based on physical sales.

That's got nothing to do with whether a contract is physically or cash settled.
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January 12, 2018, 10:38:27 AM
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That's the problem - you push the price down with paper gold, and then buy physical gold at a discount. It's because of this that China has introduced a new gold price fixing exchange based on physical sales.

That's got nothing to do with whether a contract is physically or cash settled.

There is an unlimited supply of free cash for bankers, but physical gold and delivery of Bitcoins are limited by market avalability. If more of a commodity has to be delivered than is available in the market, then it starts a "bear squeeze" if buyers demand delivery. If the contract specifies cash settlement, then this is not possible.
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January 12, 2018, 10:47:31 AM
 #8

There is an unlimited supply of free cash for bankers, but physical gold and delivery of Bitcoins are limited by market avalability. If more of a commodity has to be delivered than is available in the market, then it starts a "bear squeeze" if buyers demand delivery. If the contract specifies cash settlement, then this is not possible.

Just because a futures contract is deliverable does not mean it must be delivered. The vast majority of positions are closed out before expiry and even in markets where delivery is available, it is almost unheard of for that option to be used. So in the oil market, a large consumer that was using a futures position to lock in a low price would rather settle in cash and then go to the market to buy oil that is in the right place for delivery, not do it through their futures broker.
The availability of a delivery option doesn't protect the oil market from manipulation any more than it would gold or Bitcoin.

I'm not arguing that futures could not be used to manipulate the Bitcoin market, just that delivery is a red herring here. Cash settlement provides exactly the same function as the settlement price is fixed to actual Bitcoin markets.

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January 12, 2018, 10:48:11 AM
 #9

Kitco's report today gives some insight into the way that banks are attempting to reduce the impact of Bitcoin.
Quote
Hypothetically, bitcoin could succeed as real money, but in practice it will be an uphill battle due to countless obstacles standing in cryptocurrency’s way, said Goldman Sachs in a report.
and
Quote
Bitcoin’s extreme price volatility also works against it when it comes to wider usage and acceptance, said Pandl.
http://www.kitco.com/news/2018-01-11/Could-Bitcoin-Succeed-As-A-Form-Of-Money-Goldman-Weighs-In.html

I believe that the futures markets and assciated derivatives are designed to reduce the general acceptance of Bitcoin.
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January 12, 2018, 10:54:23 AM
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Just because a futures contract is deliverable does not mean it must be delivered. The vast majority of positions are closed out before expiry and even in markets where delivery is available, it is almost unheard of for that option to be used.


I agree with that, but I understand that China is starting to demand physical delivery of gold.
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January 12, 2018, 11:12:20 AM
 #11

I agree with that, but I understand that China is starting to demand physical delivery of gold.

Again this comes back to my main point, it's all about where the money is. China's exchange is very unlikely to have any impact on the global price. People use these markets to speculate on price or hedge physical positions. The largest part of that is speculation and the money on the London, New York and Chicago futures markets will drive the price of gold irrespective of physical supply and demand. That would be true of Bitcoin if the futures markets were trading a volume far in excess of 'physical' Bitcoin markets. As of yet, they are nowhere close to that.

There is a feedback loop of price created by either physical delivery or cash settlement that keeps the cash market price and futures contracts tied together. Cash settlement allows someone to arbitrage the two markets far more easily than physical delivery.
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January 12, 2018, 11:51:31 AM
 #12

I think China is already having an impact. They have been buying physcal gold to back the Renminbi, and they are making a bid to link oil prices to it, especially for trade with Russia. I slipped up because I thought that as the Petro-dollar went into decline, it would be replaced by the Ruble, as Russia is a major oil supplier. It looks as if the Renminbi is going to be the one though. I registered PetroRuble.com, but that may not be the winning name. Smiley Venezuela's crypto - the Petro - is a bit of a wild card, but it is difficult to see how that can succeed.

Royal Mint Gold is another wild card. They are attempting to put physical gold trading onto a blockchain.
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January 12, 2018, 12:03:12 PM
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I think China is already having an impact. They have been buying physcal gold to back the Renminbi

So that's a major fundamental factor in the gold market that will make lots of traders get bullish on 'paper' gold.

and they are making a bid to link oil prices to it, especially for trade with Russia. I slipped up because I thought that as the Petro-dollar went into decline, it would be replaced by the Ruble, as Russia is a major oil supplier. It looks as if the Renminbi is going to be the one though. I registered PetroRuble.com, but that may not be the winning name. Smiley

I stay away from trading oil as it's probably the most manipulated market there is. It moves hard and fast on 'rumours' from OPEC and then reverses immediately on the denial of the 'rumour'.

Venezuela's crypto - the Petro - is a bit of a wild card, but it is difficult to see how that can succeed.

I agree, it is very difficult to see how that will work.

Royal Mint Gold is another wild card. They are attempting to put physical gold trading onto a blockchain.

That's a new one on me, I'll have to look into it.
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January 12, 2018, 12:20:36 PM
 #14

Royal Mint Gold is another wild card. They are attempting to put physical gold trading onto a blockchain.

That's a new one on me, I'll have to look into it.


There was a massive rush into RMG domain names a year ago, and they have been dropping recently. I managed to pick  up RMGblockchain.com for a dollar recently, and that was just after they had laid the genesis block ( is that the correct term Smiley ). It's a PoS "coin" with one RMG equal to a kilo of gold that is stored in their warehouse. As I understand it, it is pre-mined, and only certain approved traders can update the blockchain, but I believe the chain can be viewed publicly.

Time to develop that site I think. Smiley
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February 24, 2018, 01:24:20 PM
 #15

I started this thread because the creation of Bitcoin futures trading sites, and the consequent derivatives market, is going to affect Bitcoin's future. It may also leave the way open to price manipulation via contracts where physical delivery is not an option.

The futures are cash settled at prices derived from crypto exchanges. How does the lack of physical delivery make any difference?


IMO, it does make a big difference. In theory, and sometimes in practice, if you don´t need to liquidate the underlying asset you can potentially create more futures than assets. That is, you could in theory create futures for a total underlying bitcoin amount of 50 million BTC even if those don´t exist. This degree of leverage gives way to a profitable a manipulation of the underlying asset.

(hint) - You probably know this, but probably the first organised futures exchange is the Dojima Rice Exchange in Japan, 17th century. Instead of Bitcoin, rice played the role of money. To make a long story short, it gave way to a heavy degree of speculation and ultimately to government intervention.
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February 24, 2018, 01:25:25 PM
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Royal Mint Gold is another wild card. They are attempting to put physical gold trading onto a blockchain.

That's a new one on me, I'll have to look into it.


There was a massive rush into RMG domain names a year ago, and they have been dropping recently. I managed to pick  up RMGblockchain.com for a dollar recently, and that was just after they had laid the genesis block ( is that the correct term Smiley ). It's a PoS "coin" with one RMG equal to a kilo of gold that is stored in their warehouse. As I understand it, it is pre-mined, and only certain approved traders can update the blockchain, but I believe the chain can be viewed publicly.

Time to develop that site I think. Smiley

Isn´t that related to the UK official coin minter company?

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