Topic: Why i think the CME listing Bitcoin Futures is actually a bad thing! (Read 2419 times)

did you heard Coinfloor to launch the first physically delivered bitcoin futures??
Check this out: https://coingape.com/coinfloor-offer-physically-settled-bitcoin-futures/

OP had a very valid doubt and his speculation on November is proving to be true. BTC price is being manipulated heavily.
CBOE bitcoin futures already proved OP's doubts on Jan 16th and we all know where it took us and now comes CME's on Jan 26th. Will BTC price dip again?

My post is predicated under the assumption that the volume of futures trading will be larger than the volume of BTC exchange trading someday in the future. This assumption makes it slightly more likely that a futures market has the ability to influence exchange rates due to margin.

Two examples: 1) trading in a futures market and 2) trading on an exchange

Ex 1. If a futures contract begins to go negative, the contract holder must either decide to 1) close out at a loss or 2) add more cash to the account in order to satisfy margin account requirements. With this is mind, all futures holders would have to decide which option to choose. This decision could create the possibility of momentum if the exchange rate were to change.

Ex. 2 When trading on an exchange, the holder doesn’t have to make these types of decisions at one time. Rather, a holder can decide when to buy or when to sell their position.

From a futures market standpoint, a lot of trading involves stop loss and TA strategies. This also happens to some extent in exchange trading. This creates a large pool of participants in both markets that behave in accordance to expectations of how “others” in the market are (and newcomers will also) behave. With the large plethora of TA information bought and sold between companies, this creates the expectation of price movement. The results of this are often additional futures purchasing and exchange rate fluctuations that either precede or follow actual decisioning made by participants.

From an exchange standpoint, the interaction with futures markets enable arbitrage opportunities. Since participants in these markets do not behave in a solo manner (only futures or only exchanges), this creates opportunity to buy on one platform and sell through the other. The net of this behavior keeps futures markets and exchanges tied together closely.

At least with respect to present day currency futures and exchanges, there is a general relationship between volume of futures trading and exchange prices. This doesn’t suggest causation, but it does suggest a strong correlation. Another way put, if BTC prices on the exchange are highly volatile, we might see a huge increase in futures trading because of the speculation interest. More futures trading, more price volatility on the exchanges.

In conclusion:
1) Futures markets and exchange market participants have different decisioning that influences market behavior and price
2) Futures markets may significantly alter BTC exchange rates for as long as futures trading volume is higher than exchange trading volume.
3) Over time, the futures markets and BTC exchanges will become more intertwined resulting in less volatility between the platforms

Final comment: Once the futures markets open, price volatility will stay rather consistent and will correlate positively with good news and upbeat market sentiment. As these interactions between futures markets and exchanges mature (also as BTC availability decreases), volatility will decrease.

hmmm so what do you guys think will happen and the better question how fast will it happen will it be like by monday the price will dump because of all the shorts and then raise and then dump again? Or will it take some time like a few weeks or so? I don't really know what futures are and didn't know anything about the stock market world until I got into crypto

It will not. What it will do is to turn bitcoin even more volatile than what it is now. Pumps and dumps will be massive due to money flowing from hedge funds.

The only reason cme futures is bad is because when the sec cancels it, btc will tank hard. But if there were never the future's tease, it wouldn't be a big deal and btc would quietly be making an uptrend past $5k.

Yes this.

What they are really doing is trading "contracts", the same way how Etoro users are trading CDF instruments. All they are doing is making calculated risks on the price movement of Bitcoin, not buying and selling actual coins.

Everything is also settled using the price from Gemini. https://gemini.com/

But if they truly want to short sell Bitcoin, they will be in hell in trying to figure out why it keeps rising.

hahaha so much doom and gloom about futures that you all forget whats going on.

You say there's no correction right now...uhhh we literally just had a correction last week!
So what in the world are you talking about?? In fact we've had TWO corrections in the past month!!

I would say its the massive influx of new users that are buying up all the Bitcoin. Coinbase new users are absolutely booming since futures were announced about 6 weeks ago. On two separate days Coinbase has added 100,000 users in a single day!

I think all you doom and gloom type people just need to sit back for a few weeks and let futures start and no it isn't the end of the world, Bitcoin will be just fine and the next 10x march to $100k will continue.

They are already buying. Why do you think theres no correction right now? Its only green candles, they are buying all orders up.

People should stop selling for a while, decrease the volume on the exchanges. There should be some way to protect against what they are planning to do.

This is an interesting alternative interpretation on introduction of futures from one commenter, it would support bullish momentum prior to peak but its getting hard to pinpoint exactly at what point that will occur, small investors should take profits of 25-50% at 200-500% upside and let it run from there my proposition:

https://www.cryptocoinsnews.com/bitcoin-price-will-hit-20000-before-tanking-financial-expert/


No, you're not understanding real economic bubbles.

Tulip bulbs in the 1600s traded normally as a luxury commodity for years. It was only when derivative instruments were introduced (tulip futures and options) that speculation went rampant. 1920s stocks reflected rational investment in the emergent electrification of the nation, until excess leverage provided by the banks allowed 10x or higher leveraged positions. The 2008 debacle was fueled by Collateralized Debt Obligations and Credit Default Swaps - more derivatives offering excessive leverage.

Are you starting to see the pattern? True bubbles occur when the presence of leverage either directly or through derivatives becomes excessive. So right now what we have is likely the start of any bubble since futures trading is just beginning later this month. Only after the futures desks are filling orders at a clip and bitcoin options are a thing will we likely have crossed over into true bubble territory.

well we'll just see how it plays out i guess haha. I for one am not worried. Futures aren't gonna suddenly stop the exponential increase in user adoption and price. If anything it'll get people more interested. They can try to control it. We've got tens of millions currently in Bitcoin and there will be hundred of millions more people getting into it in the next few years. Can Wall St control a capped supply where most of the supply is already gone and not selling to them and tens or likely hundreds of millions of people moving in to the market over the next few years to get their own piece of that supply. Not too mention plenty of people on Wall St don't want to short but in fact want to go long. Despite all the doom and gloom talk of some people, I'm not worried in the slightest.

So a hedge fund betting a few billion on bitcoin $1000 in 6 months would not be incentivized to somehow get a hold of a huge pile of real bitcoins or borrow it from someone who has? Cash settlements is even worse because profit is decoupled from the crypto market and taking up strategic positions in actual coin to manipulate prices could prove a drop in the ocean compared to cash profit. There's only $120m buyside to $1k bitcoin, order depth isn't a measure of demand but on a $200bn asset you'd expect a little more. The crypto space relies on unconventional value signals to determine price points, it's easy to buy influence in the right channels to propagate an agenda, bitcoincash was a well coordinated example of this. Bitcoin is highly susceptible to crowd psychology and they are targeting the most controversial crypto of the lot backed by threats of congress regulation/fbi/atf/homeland security anti money laundering/terrorism sentiments and a discontent public at large who were sidelined and only wish to see bitcoin crash and burn. What small investors dont comprehend right now is that there will be a proverbial 800 pound gorilla (or bear I guess) with a stick on the sell side starting december 10 (earlier than I thought) which until this point wasn't there before. Covering a short position is no big deal, simply start over on a higher price, there will be constant selling pressure going forward to test the market for price discovery and force weak hands out of positions, this is their bread and butter, you can't win. I was there in biotech, it's like running into a brick wall over and over as a small investor, long investors needn't apply i'm addressing people like myself who see short term opportunity in bitcoin, I think long term investors bullish on bitcoin is facing a different set of fundamental challenges, as long as one is not all in on bitcoin atleast it won't ruin you.

https://hbswk.hbs.edu/item/the-problem-with-hedge-funds
https://www.thebalance.com/how-do-hedge-funds-impact-the-stock-market-3306238
http://business.financialpost.com/investing/the-next-big-short-hedge-funds-ready-to-bet-against-bitcoin-1


Already bought or will borrow, no need to buy.
These titans don't enter on ath, futures is rigged wouldn't happen if w:st couldn't benefit already, expecting a big push upwards to let crowd psychology kick in before going to work. Even if hedge funds ride in on a white horse to buy everyone out it's a calculated move and price to pay to gain control of the golden calf, cut the head of the hydra, bitcoin is a systemic risk to the status quo, remove confidence in bitcoin = triumph. This is war to high street if you haven't been paying attention, big enough for the privilege of becoming another casualty of the masters of the universe, ripe for the slaughter. Same guys who muscled in on Lazard when our cousin was raking in $100m per in private salary for a short time in the late 90s blowing cigar smoke in UBS face from his top floor office on rockefeller plaza without a single f*k given, well that didn't last long and he saw an 85% decline in private assets over a period of years after Lazard was subject to a hostile takeover. Color me sceptical.

Are you guys not realizing that the futures market is cash settled? No bitcoin will be exchanging hands. There will be no selling of bitcoin in futures no matter how much they short. All they are doing is betting on the price. It won't affect the market at all. It's just a way for Wall St investors to make and lose money against other Wall St investors without actually getting into Bitcoin because they don't want to deal with crypto exchanges. They stick to their regulated Wall St exchanges where they don't put their millions of dollars at risk of being hacked or dealing with the limited withdrawal policies of crypto exchanges.

"it is now very invietable that the bitcoin markets "spot" and futures will be heavily manipulated which may lead to a nosedive"

True to that - I completely agree, and guess what? It is totally and absolutely inevitable future, there is no way that power-that-be will miss that opportunity to get even richer.
Bitcoin was, is and probably always will be prone to any kind of manipulation, if there will be organized movement or rich enough individual - the price might be manipulated with ease.

And I also acknowledge - introducing bitcoin options and futures will bring the first real chance to short bitcoin, since you could bet on the price going down too. But again, we can't do anything about it.

Rekkage incoming...

Read that already. Doesn't change the fact that futures are cash settled. They still have to first buy into bitcoin in order to crash the price = bullish!

Not worried in the slightest.

Bloomberg has an article about hedge funds itching to short bitcoin:

https://www.bloomberg.com/news/articles/2017-12-04/the-next-big-short-hedge-funds-prepare-to-trade-against-bitcoin

Regulation falls heavy on merchants and business dependant on physical land based locations (such as grocery stores/casinos/real estate etc) where methods of enforcement are easy and proven to be effective. The regulatory body cooperates with many different agencies to enforce on multiple levels in different parts of society, it's all intervowen, EU follows US in these things, always. I'm thinking Liberty Coin scenario, and it certainly will put more conservatie affluent demographics into Jim Rickards line of thinking which isn't unreasonable in face of regulatory pressures and all the other things surrounding mainly bitcoin.

It's not hard to control a global market using a combination of agencies in cooperation (there are many multilateral agencies for precisely this purpose), the human factor is the weakest link and easily influenced, citizens will be unable to decouple from the current situation without any means of counter mobilization, to governments around the world the crypto space right now is a blonde girl with big tits who just turned 18 and moved out of her parents house. I really see no successful long term outcome whereas bitcoin is concerned, newer blockchains will bridge the utility factor that bitcoin severely lacks which could be enough to activate citizens in face of future "coups" without the need for deeper organized movements (think net neutrality movement). Huge swathes of the population were sidelined by bitcoins meteoric rise, don't underestimate "skadeglädje" as a psychological concept, noone will run to bitcoins defense.

Once you slap money laundering/terrorism on bitcoin it's all over, social sentiments far outweigh utility unless there is a gigantic depression-like market crash forcing a public rush into crypto. I would say our problems in this scenario falls closer on some kind of large scale insurrection/multi nation war scenario which for sure goverments are used to handling and swiftly reigns in any home brewed decentralized initiatives.

With that said I actually checked in to reconsider short term performance of bitcoin based on new sentiments (this is the speculation forum by the way for those who are following my line of thought, do your own research, I am sharing my thoughts influenced largely by personal measure of risk exposure like many others, at the point where I myself from experience know that emotions kick in and dictates behaviour. It is possible that if my investments were 1/10 or ten times higher these conclusions would be significantly alterated):

-Crypto community sentiments aren't euphoric at 12k bitcoin and volume is good, the longer prices remain stable the harder it is to utilize crowd psychology, I am not far behind you on 6 digit bitcoin within 30 days if speculation concerning futures and shorting remains a real prospect, however:

-I think it will peak shy of $1tn or somewhere around 50k due to these figures being psychological barriers, the crypto market should peak at $1,3-1,5tn since there will be some overshoot, fundamentally alot of people will be in alot of profit at these levels and this will affect behaviour and induce euphoria. Peaks are often underestimated so somewhere north of $1tn is the new target.

-I agree, it's not easy to enter a shorting space at these levels since price discovery remain stable, but this sentiment was not the same a few days ago when price went from 7k to 11 in one burst.

-Lastly, before positioning yourselves in face of rising value, besides market psychology, consider volatility. There was sound reasoning behind a previous prediction of $15 000-30 000 and the upper estimate is still relevant, but I think there will be overshoot towards $50 000/$1tn bitcoin, with realistic order validation from 42-47k (this wont last for more than 24-48 hours at most during initial rush). $25k bitcoin @ $500bn isn't news, $50k @ 1tn is a sensation.


Tether is facing its own set of challenges, I did consider bitshares to hedge without having to convert to fiat but volume on openledger is too low and the big exchanges requires KYC so it's no different from wire transfer to bank account from an anonymity point of view.

On the topic of the UN, used to be a stern supporter of this institution but it's a mess now that people/countries in the west understand that BRICs and even big countries like France ain't got their shit together from a moral and ethical viewpoint that the nordic countries, germany and regions of the US takes for granted. US already knew since long it's always been sceptical of the UN, but for me as a Scandinavian to witness the reality that social media presented unfortunately makes me completely dismiss the leaders of 95% of all countries, transparency internationals corruption map is a good starting point if you still take the UN seriously. United Nations will be replaced by a citizens initiative, it's toothless due to infiltration and dependent on sovereigns for funding.  

tldr: I believe I represent a majority of investors right now between $5000-$30 000, predicting short/medium term peak of 200-500% before and early into futures opening late december/january. If you're low on liquids and see your crypto shoot up like this it's probably a wise thing to unload 25-50% temporarily and wait for rebound, and reenter in a quarter to 6 months. Personally I think this is it for bitcoin now that serious options are beginning to crop up, especially ethereum with krypto kitties are the writing on the wall (not this particular game but the spirit of where things are heading), eth it correlating with bitcoin and will nose dive with , come back second half 2018 on strong fundamentals.

Interesting points. But what about tether? Tether was not created by the US government, but by Ifinex. And if Bitfinex banned US from their portfolio just to avoid this scrutiny?

CME is in the US. Can they manipulate the price on other countries? And the bitcoin exchanges from other countries, how they will be scrutinized? They will need to pass some regulations in the UN, and expand futures to other countries as well. This will take time.

Not sure what you mean by regulation here. Sure they can regulate futures markets because that is wall st but futures markets have nothing to do with bitcoin itself other than just going off the price of Bitcoin markets. They can regulate US exchanges to have KYC and AML and make the exchanges hand over tax information sure okay thats fine nothing really wrong with that. They're not gonna ban Bitcoin itself, this isn't China. Not sure how else you think they can regulate Bitcoin. Seems like just a bunch of doom and gloom.

And even if the futures investors buy up a bunch of bitcoin to try to continually crash the price to make futures shorts work, its gonna get harder and harder as time goes on because of user adoption of Bitcoin increasing so much. As we've seen in the last two corrections, buy pressure is so strong these corrections no longer last 6 weeks like they did earlier this year, now they last barely a week before buy pressure pushes the price back to new all time highs. Eventually Wall St will realize that while they can control markets in which they ARE the market, its gonna be a lot harder to control a global market where literally anyone can participate and that is gaining adoption by the hundreds of thousands of user every few days.

I don't know about all of you, but I certainly won't be selling a single satoshi at these super low prices. We're heading to 6 digits, cash settled futures ain't doing nothing to stop that.