Does anybody know if they are going to be able to do naked credit default swaps (multiple insurance policies on the same underlying asset -- here, bitcoins -- regardless of whether they own a stake in it)? That's what it appears to be saying. If so, while this is probably a non-event, it does have the potential to be very negative news. The idea is that you can cause a crash in Bitcoin fairly easily if you are a whale and you can collect several orders of magnitude times the losses that you created. This was Goldman's strategy during the financial crisis.
Will this happen? I don't see it happening. Too many tech savvy kids in the bunch and whoever did this would suffer hack attacks and DOS's for the rest of eternity. But it is a creepy thought and one to just watch for... not to act on (at least not yet at all).
Topic: TetraExchange. Bitcoin derivative approved. (Read 1827 times)
I don't understand stock market stuff, or the jargon, but a news article blamed the great depression on short selling. I don't really understand what short selling is, but I hope it doesn't drag bitcoin down. Is anything like that possible now TetraExchange is up and running?
We will have to see. This is an OTC (over the counter) exchange. So it's mainly for large investors still. The COIN ETF will be a much bigger deal.
but if it targets investors who would otherwise not buy, the expected result is up.
question is, does this actually make investors who do not buy bitcoin, buy this thing instead? And will it have a large effect?
i guess all we can do is wait and see.
The derivatives make bitcoin look like all other stuff out there.
WE will end up with a bunch of derivatives with a notional value vastly exceeding BTC value. The result is short term stability, but longer term INSTABILITY.
So, if and when financial system crashes (who knows when), BTC will be taken down as well.
We will have to see. This is an OTC (over the counter) exchange. So it's mainly for large investors still. The COIN ETF will be a much bigger deal.
but if it targets investors who would otherwise not buy, the expected result is up.
question is, does this actually make investors who do not buy bitcoin, buy this thing instead? And will it have a large effect?
i guess all we can do is wait and see.
We will have to see. This is an OTC (over the counter) exchange. So it's mainly for large investors still. The COIN ETF will be a much bigger deal.
Just found this fantastic news.
http://www.coindesk.com/teraexchange-bitcoin-derivative-cftc/
http://247wallst.com/banking-finance/2014/09/12/meet-the-first-cftc-regulated-bitcoin-derivatives-trading-teraexchange/
http://finance.yahoo.com/news/teraexchange-launches-first-regulated-bitcoin-130500229.html
https://coinreport.net/teraexchange-launches-first-us-regulated-bitcoin-derivatives-trading/
and the list goes on
Any ideas if this will boost the price?
Or kill Bitcoin through shorting ...
http://www.coindesk.com/teraexchange-bitcoin-derivative-cftc/
http://247wallst.com/banking-finance/2014/09/12/meet-the-first-cftc-regulated-bitcoin-derivatives-trading-teraexchange/
http://finance.yahoo.com/news/teraexchange-launches-first-regulated-bitcoin-130500229.html
https://coinreport.net/teraexchange-launches-first-us-regulated-bitcoin-derivatives-trading/
and the list goes on
Any ideas if this will boost the price?
Or kill Bitcoin through shorting ...
It won't boost the price, when a good news comes the price drops, this period is so strange.
So does the amount of bitcoins the arbitrageurs buy depend on how popular the exchange becomes?
It depends on if there are any trading opportunities for arbitrageurs. If the derivative gets too high or low compared to the actual price of Bitcoin, then arbitrageurs will take action to make a profit by bringing the prices together. If the derivative is higher than Bitcoin, Bitcoins will be bought and derivative sold. If the derivative is lower than Bitcoin, Bitcoins will be sold and derivative bought. Buying pressure on the derivative will translate into buying pressure on Bitcoin itself.So this puppy can push Bitcoin both ways?
Let's hope it boosts Bitcoin to da moon
So does the amount of bitcoins the arbitrageurs buy depend on how popular the exchange becomes?
It depends on if there are any trading opportunities for arbitrageurs. If the derivative gets too high or low compared to the actual price of Bitcoin, then arbitrageurs will take action to make a profit by bringing the prices together. If the derivative is higher than Bitcoin, Bitcoins will be bought and derivative sold. If the derivative is lower than Bitcoin, Bitcoins will be sold and derivative bought. Buying pressure on the derivative will translate into buying pressure on Bitcoin itself.
So does the amount of bitcoins the arbitrageurs buy depend on how popular the exchange becomes?
Again, the exchange buys no Bitcoins. That is left to the arbitrageurs. See my last post.
So does the amount of bitcoins the exchange buys depend on how popular it becomes?
The link betwen the derivatives markets and the actual underlying (Bitcoin here) are always made by arbitrageurs. For example, if the futures market for S&P 500 is overpriced, you short the future and buy the basket of stocks making up the S&P 500. The prices will come back together and you will profit. As a side effect, the futures markets thus track the underlying market very closely. The same will be done for Bitcoin futures. This means if the derivatives market is bid up to $10,000 / Bitcoin, Bitcoins will be bought and futures sold along the way to keep the two in sync. There are your purchased Bitcoins.
I read this coindesk article http://www.coindesk.com/teraexchange-bitcoin-derivative-cftc/
It gave me the impression that the exchange is trading in imaginary bitcoins because it says "no actual bitcoins are exchanged during the process". It goes on to say that the exchange allows institutions forbidden from investing in digital currency to invest in digital currency. From the article
The development of a bitcoin derivative pushes the broader market into uncharted waters, opening the door to move involvement from institutions that, in many cases, are prohibited by their own policies to invest in digital currency.
It gave me the impression that the exchange is trading in imaginary bitcoins because it says "no actual bitcoins are exchanged during the process". It goes on to say that the exchange allows institutions forbidden from investing in digital currency to invest in digital currency. From the article
The development of a bitcoin derivative pushes the broader market into uncharted waters, opening the door to move involvement from institutions that, in many cases, are prohibited by their own policies to invest in digital currency.
After reading the article I'm not sure if the exchange needs to buy any bitcoins at all. It says swaps there do not use actual bitcoins, it's all done with dollars. From the article
The bitcoin swap, like other financial products of its kind, enables parties holding the instrument to hedge against fluctuations in the digital currency’s value.
No actual bitcoins are exchanged during the process. Rather, the swaps are denominated in US dollars and actual transactions between counterparties use that currency as well.
The bitcoin swap, like other financial products of its kind, enables parties holding the instrument to hedge against fluctuations in the digital currency’s value.
No actual bitcoins are exchanged during the process. Rather, the swaps are denominated in US dollars and actual transactions between counterparties use that currency as well.
so they are 'swapping' fractional reserve coins?
After reading the article I'm not sure if the exchange needs to buy any bitcoins at all. It says swaps there do not use actual bitcoins, it's all done with dollars. From the article
The bitcoin swap, like other financial products of its kind, enables parties holding the instrument to hedge against fluctuations in the digital currency’s value.
No actual bitcoins are exchanged during the process. Rather, the swaps are denominated in US dollars and actual transactions between counterparties use that currency as well.
The bitcoin swap, like other financial products of its kind, enables parties holding the instrument to hedge against fluctuations in the digital currency’s value.
No actual bitcoins are exchanged during the process. Rather, the swaps are denominated in US dollars and actual transactions between counterparties use that currency as well.
Will this exchange have to buy up a load of coins to get started, or does it work differently to an ETF?
As far as I know it works as follows.
An ETF buys up a load of coins. Therefore an ETF is basically a small bank that must adhere to regulations.
A trader wanting to trade short or long borrows coins from the broker using his own account as collateral (called free margin).
If a trade turns into a loss it will be deducted from his collateral by selling off collateral to cover the losses.
If a trade turns into a profit, you will receive the profit.
This saves having to shift money from LTC to BTC to USD, etc. making trading much easier.
But TetraExchange does derivatives so you can probably do options and futures on Bitcoin.
An ETF buys up a load of coins. Therefore an ETF is basically a small bank that must adhere to regulations.
A trader wanting to trade short or long borrows coins from the broker using his own account as collateral (called free margin).
If a trade turns into a loss it will be deducted from his collateral by selling off collateral to cover the losses.
If a trade turns into a profit, you will receive the profit.
This saves having to shift money from LTC to BTC to USD, etc. making trading much easier.
But TetraExchange does derivatives so you can probably do options and futures on Bitcoin.
but is wall street interested in and allowed to use this?
i mean, they are targeting wall street, aren't they?
IMO at this point shorting might not be the best option.
As far as I know it works as follows.
An ETF buys up a load of coins. Therefore an ETF is basically a small bank that must adhere to regulations.
A trader wanting to trade short or long borrows coins from the broker using his own account as collateral (called free margin).
If a trade turns into a loss it will be deducted from his collateral by selling off collateral to cover the losses.
If a trade turns into a profit, you will receive the profit.
This saves having to shift money from LTC to BTC to USD, etc. making trading much easier.
But TetraExchange does derivatives so you can probably do options and futures on Bitcoin.
An ETF buys up a load of coins. Therefore an ETF is basically a small bank that must adhere to regulations.
A trader wanting to trade short or long borrows coins from the broker using his own account as collateral (called free margin).
If a trade turns into a loss it will be deducted from his collateral by selling off collateral to cover the losses.
If a trade turns into a profit, you will receive the profit.
This saves having to shift money from LTC to BTC to USD, etc. making trading much easier.
But TetraExchange does derivatives so you can probably do options and futures on Bitcoin.
http://cointelegraph.com/news/112474/will-a-bitcoin-etf-help-bitcoin-go-mainstream
I like Mr. Luria's price prediction in this article.
I like Mr. Luria's price prediction in this article.
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