Reuters: Bitcoin gets boost as U.S. watchdog (CFTC) approves first swap

FloodZone

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Quote from: Dawnbreaker on September 14, 2014, 10:46:29 AM

I don't understand, what is going on? A swap?

Basically a more advanced form of currency exchange. See here for more info:
http://en.wikipedia.org/wiki/Currency_swap
Pretty awesome that a US regulatory body is putting its rubber stamp on a bitcoin-based financial derivative.

AdamWhite

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Quote from: RawDog on September 12, 2014, 03:10:26 PM

Don't worry about it dude - just put one of these in your car window:

wasserman99

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Quote from: RappingSniper on September 14, 2014, 12:32:36 PM

Quote from: Dawnbreaker on September 14, 2014, 10:46:29 AM

I don't understand, what is going on? A swap?

derivatives man. This is really good news. Small merchants might fear doing business in bitcoins because the effects of price fluctuations far outweigh the profit they make from the sale. Let's say I make a deal to sell you 9 gallons of industrial solvent in 9 months. You agree to do the deal for X bitcoins. Without swaps I'm now exposed to price risk for the next 9 months. if bitcoins drop in value relative to the USD I can end up losing money on the deal. Now that I can swap I can sell someone the promise of your X bitcoins in 9 months for a cash amount that's decided today and now I don't need to worry about the price of bitcoins because I'm no longer exposed to the risk.
Swaps and derivatives are a big part of what makes international currency markets work too since it give vendors more options to deal with clients from countries with volatile currencies.

Derivatives also increase your options for handling bitcoins. If Puts and Calls become possible, then you can start constructing positions that profit when the price is volatile in either direction or other helpful setups. Derivatives themselves are a zero-sum game by design but they can add a lot of flexibility to the main market they support

These types of agreements (buying certain products over long periods of time) is more typical of business to business transactions and so far there is little to no market for these kinds of transactions. Before long term b2b transactions involving bitcoin will start to happen, b2b transactions involving bitcoin for intimidate delivery and payment will need to come first. I think at first the swaps/futures contracts will be used primarily by speculators, however over the longer term it may be used in the way you describe

RappingSniper

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Quote from: Dawnbreaker on September 14, 2014, 10:46:29 AM

I don't understand, what is going on? A swap?

derivatives man. This is really good news. Small merchants might fear doing business in bitcoins because the effects of price fluctuations far outweigh the profit they make from the sale. Let's say I make a deal to sell you 9 gallons of industrial solvent in 9 months. You agree to do the deal for X bitcoins. Without swaps I'm now exposed to price risk for the next 9 months. if bitcoins drop in value relative to the USD I can end up losing money on the deal. Now that I can swap I can sell someone the promise of your X bitcoins in 9 months for a cash amount that's decided today and now I don't need to worry about the price of bitcoins because I'm no longer exposed to the risk.
Swaps and derivatives are a big part of what makes international currency markets work too since it give vendors more options to deal with clients from countries with volatile currencies.

Derivatives also increase your options for handling bitcoins. If Puts and Calls become possible, then you can start constructing positions that profit when the price is volatile in either direction or other helpful setups. Derivatives themselves are a zero-sum game by design but they can add a lot of flexibility to the main market they support

Dawnbreaker

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I don't understand, what is going on? A swap?

iamahappyminer

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We called TeraExchange- the minimum trade size is $1M USD and only eligible contract participants can trade the swap.

This is great news for those that have large mining operations, companies with a lot of flow like Coinbase and a step in the right direction for the trustworthiness of Bitcoin trading as this is the first regulator outside of the money transmission world to approve a digital currency product. Counter-party risk, a mainstay of the digital currency trading industry, will hopefully be eliminated for traders as more products get approved. In addition, this is good news for the ETF as the SEC and CFTC have similar regulatory mandates.

bornil267645

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AltoCenter.com

This should have a positive effect on Bitcoin. Bitcoin rules Cool

wasserman99

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Quote from: zimmah on September 13, 2014, 11:03:04 AM

Quote from: blumangroup on September 12, 2014, 05:09:41 PM

Quote from: jbrnt on September 12, 2014, 03:34:16 PM

So this swap is an agreement to sell bitcoin at an agreed rate in the future, right? Does it mean merchants who accepts bitcoin do not need to sell the bitcoin they received on the exchange immediately?

Technically this is true. However someone selling a futures contract to sell something in the future generally has the same effect on the "spot" market as an outright sale would have.

i'm not an expert on this subject, but i think there is a few crucial differences that make the pressure less harmful.

1) The sell is in the future, meaning the market has more time to respond (either positively or negatively)

2) If the seller would agree with the current price, he would have sold outright, but clearly the seller is hoping the price will improve in the timeframe of his contract, therefore, the intended selling price is higher than an immediate sell, therefore even though there is sell pressure, it's not like they want to sell it 'at any cost' like a market order.

All in all future contracts do drive the price down, but not the same as a market sell.

If someone were to sell a futures contract to sell 1 BTC then someone else will need to buy a futures contract for 1 BTC. When they enter into this contract the buyer would now not buy the 1 BTC they would otherwise buy on the spot market. The buyer would still have all the benefits of owing the 1 BTC except for being able to spend it on the network until the contract expires and the 1 btc is delivered

Velkro

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when reuters write about bitcoin it must be big news

hhanh00

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It's not a future contract but a swap. The margin calls do not work the same way.

Quote from: jbrnt on September 12, 2014, 03:34:16 PM

So this swap is an agreement to sell bitcoin at an agreed rate in the future, right? Does it mean merchants who accepts bitcoin do not need to sell the bitcoin they received on the exchange immediately?

Someone asks if it's like a future and then a bunch of people reply "yes". Now this thread assumes it's a future. No offense but this is how misinformation is spread.

zorke

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Quote from: Bitcoinpro on September 12, 2014, 07:19:42 PM

the chance's of someone delivering Bitcoin at below market rates just because they have signed a futures

contract could still be fantasy,

"had to construct an index to gauge the value of bitcoin that the CFTC was satisfied could not easily be manipulated"

this is just fancy terminology to say Terra had the money/connections to pay for CFTC approval,

All exchanges will rise and fall together,

sure if they want to have a gauge that extrapolates out 6 months to provide an average please

go back up to the first line I wrote,

Good on Terra for doing it and we wish them well for investing in Cryptocurrency.

The person selling the bitcoin would need to put up some kind of collateral to enter into the agreement. As the price is less favorable to the seller, more of the collateral is taken from them. If the level of collateral falls below a certain level then the account would automatically enter into a buy futures transaction to unwind the sell transaction (individual contracts are fungible)

zimmah

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Quote from: blumangroup on September 12, 2014, 05:09:41 PM

Quote from: jbrnt on September 12, 2014, 03:34:16 PM

So this swap is an agreement to sell bitcoin at an agreed rate in the future, right? Does it mean merchants who accepts bitcoin do not need to sell the bitcoin they received on the exchange immediately?

Technically this is true. However someone selling a futures contract to sell something in the future generally has the same effect on the "spot" market as an outright sale would have.

i'm not an expert on this subject, but i think there is a few crucial differences that make the pressure less harmful.

1) The sell is in the future, meaning the market has more time to respond (either positively or negatively)

2) If the seller would agree with the current price, he would have sold outright, but clearly the seller is hoping the price will improve in the timeframe of his contract, therefore, the intended selling price is higher than an immediate sell, therefore even though there is sell pressure, it's not like they want to sell it 'at any cost' like a market order.

All in all future contracts do drive the price down, but not the same as a market sell.

zimmah

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Quote from: Bitcoinpro on September 12, 2014, 02:54:19 PM

Quote from: RawDog on September 12, 2014, 02:52:29 PM

Quote from: Bitcoinpro on September 12, 2014, 02:46:41 PM

dosn't really mean anything if it does explain it to me

You are too dumb to understand things like this. However, I'll tell you one thing you can understand - this is fucking huge.

Sure bud just answer the question instead of trying to sound like an ass hat

translation:

I want to sound smart by calling you stupid, but the truth is I do not understand it myself either.

Eastwind

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Quote from: jbrnt on September 12, 2014, 03:34:16 PM

So this swap is an agreement to sell bitcoin at an agreed rate in the future, right? Does it mean merchants who accepts bitcoin do not need to sell the bitcoin they received on the exchange immediately?

I think so. But you have to pay for the facility.

vipgelsi

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At this day and age any news is good for bitcoin especially watchdog groups we need to stay relevant.

coinits

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011110000110110101110010

Quote from: RawDog on September 12, 2014, 03:00:18 PM

Quote from: Bitcoinpro on September 12, 2014, 02:54:19 PM

Quote from: RawDog on September 12, 2014, 02:52:29 PM

Quote from: Bitcoinpro on September 12, 2014, 02:46:41 PM

dosn't really mean anything if it does explain it to me

You are too dumb to understand things like this. However, I'll tell you one thing you can understand - this is fucking huge.

Sure bud just answer the question instead of trying to sound like an ass hat

The answer will be of no use to you. You'll just have to believe that bitcoin swaps are a very important step forward. It basically means, now wall street is actually involved and designing financial products around bitcoin. Never before has that been done.

Look, this stuff is technical. It's not really good for morons. Try a Frisbee.

This is terrible news. It is all about TPTB taking control of BTC.

News flash: Wall Street is a criminal enterprise. They will make a mess of it and dictate the price. Look at what they have done to gold and silver with their fake metal ETFs and their rehypothecated shit sales of metal. They will sell the same Bitcoin to different entities all at the same time, and they will do this, because it will be outside of the blockchain. They will shuffle bitcoin to the entity that is being audited to make the books jibe.

These cocksuckers will control the market and control the price. It is huge alright. It is a huge fucking disaster.

Jump you fuckers!

http://www.youtube.com/watch?v=yge311sFhC8

hhanh00

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There are no exchange of bitcoin at all in this swap - it's all in USD. You guys are talking about a future contract.

This is more like your Costco price warranty. You have Bitcoins today but if it's worth less in a year, you get the difference. However, in the case of the swap if it's worth more then you pay the difference. Also, the reference may not be today's price as long as both parties agree to it.

counter

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Time is on our side, yes it is!

I think this does a ton to help Bitcoin be more widely accepted and it helps legitimize it more so in the eyes of those who've been sitting on the sidelines. They are probably tons of people who are unsure what Bitcsoin is really all about and now they have more of a reason to look into it. They likely won't but hey it is what it is.

LiteCoinGuy

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In Satoshi I Trust

TeraExchange Receives US Approval to Launch First Bitcoin Derivative

http://www.coindesk.com/teraexchange-bitcoin-derivative-cftc/

Bitcoinpro

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the chance's of someone delivering Bitcoin at below market rates just because they have signed a futures

contract could still be fantasy,

"had to construct an index to gauge the value of bitcoin that the CFTC was satisfied could not easily be manipulated"

this is just fancy terminology to say Terra had the money/connections to pay for CFTC approval,

All exchanges will rise and fall together,

sure if they want to have a gauge that extrapolates out 6 months to provide an average please

go back up to the first line I wrote,

Good on Terra for doing it and we wish them well for investing in Cryptocurrency.

Topic: Reuters: Bitcoin gets boost as U.S. watchdog (CFTC) approves first swap (Read 2886 times)