5 things to keep in mind about CME Bitcoin Futures


1. How will CME Bitcoin Future work?

If an operator buys a bitcoin futures contract and holds it when it expires, no one delivers the 5 underlying bitcoins to the contract at the time of expiration. Instead, CME (NASDAQ: CME) calculates a Daily Bitcoin Reference Rate (BRR) that aggregates the commercial flow of the main bitcoin spot exchanges during a calculation window to the US dollar price of a bitcoin from 4:00 p.m. London time, and if the Bitcoin reference rate at the expiration of the underlying futures contract is higher than the BRR when the contract was opened, the investor is paid the difference (multiplied by 5), and vice versa.

The BRR is designed the IOSCO Principles for Financial Benchmarks and Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute to the price data to calculate the BRR.

This means that operators are settled in cash and get exposure to bitcoin without handling bitcoins.

2. Who will shorten Bitcoin futures?

So far, heavy institutional investors have no choice but to reduce Bitcoin as they do with other commodities and stock futures. I do not expect any significant participation from retail investors, but most short exchanges will start below two categories

  1. Miners
  2. Institutional Investors

Why miners: every month, miners have to Keep your cash flows to pay your expenses, including electricity and hardware costs. Unrealized profits always belong to the market. If they believe that the price of Bitcoin is about to go down, they could cover its price by reducing a minimum percentage of the holdings that can be covered later. Since the miners have direct access to all the "inside information", I think they could use Bitcoin futures aggressively.

Why Institutional Investors: As we all know, many of the main institutional players such as JP Morgan Chase & Company (NYSE: JPM) are not so happy with the recent increase in Bitcoin prices. According to me, they would also look for short-circuit opportunities in Bitcoin. Any negative news throughout the cryptographic space will be "optimistically exploited" by them, which can lead to a substantial price correction.

3. Bitcoin will stabilize and become more popular

2017 is one of the best years in the history of Bitcoin. It has given a yield of almost 700% since the beginning of the year, to date. CME is about to start Bitcoin Futures in the second week of December, which will make BTC more popular among institutional investors of great weight. I am sure that December 2017 will be the month in which Bitcoin registers the highest volume ever recorded in its history. In addition, we should not expect exorbitant returns such as 500% or 700% return of the current level on an annual basis. Investors who bought less than $ 3,000 should not worry about short-term fluctuations and sit with a loss of $ 4,500.

source: coinmarketcap

4. About 120 Hedge Funds focus exclusively on Bitcoin

According to CNBC, and financial research firm Autonomous Next, the amount of funds that invest in digital badets such as bitcoin has grown rapidly to 124 in October 2017. These crypto-funds they have around $ 2.3 trillion in total badets under management. Hedge fund managers are anticipating heavy targets for BTC. For example, the legend of hedge funds Novogratz has a target of $ 40,000 for BTC at the end of 2018.

There is a great wave of money, not only here but around the world. Due to the lack of response from the offer, it will exaggerate on the upward path. There will be 50 percent corrections. It will also be exaggerated on the way down.

~ Michael Novogratz, hedge fund manager

Once the future of CME Bitcoin is operational, these hedge funds will move to the future Bitcoin market and we can expect the badet under management to grow in the coming months .

The data shows that the number of crypto-funds and their badets under management is still insignificant compared to the hedge fund industry of $ 3.15 billion. Let's wait and see how much more funds will flow to the crypto market in the coming quarters.

Bitcoin Wallet tells the blockchain chart. information

5. Speculation to increase due to margin availability

Option players will have to maintain a lower initial margin to buy or sell a Bitcoin future. At the end of the day, the settlement goes from account to account on the basis of daily movements. For example, the money goes from "short contract" to "long contract" in case of price increase and money moves from "long contracts" to "short contracts" in case of falling prices. The margin has not yet been confirmed by CME, but we can expect somewhere around 10% to 20%. This means that option players can buy a lot (5 Bitcoins) of future Bitcoin at $ 10,000 if the market price of 1 Bitcoin is $ 10,000 with an badumed margin of 20%. Speculation on both the long side and the short side will increase which would increase the volume and, in turn, reduce volatility.


Along with CME, CBOE also comes with Bitcoin futures, which would make the space even more interesting. I am anticipating that more governments will begin to badyze how to regulate all the crypto trade. Any regulation would turn out to be a positive event for the cryptographic space. As long-term investors, we should not be excited about the price movement and wait until 2020 to see how the story unfolds. More than money and graphics, we are following the story behind this: the decentralized, transnational and global currency.

Disclosure: I am / we are long BITCOIN.

I wrote this article myself, and expressed my own opinions. I am not receiving compensation for it (which is not from Seeking Alpha). I have no business relationship with any company whose actions are mentioned in this article.

Source link

Leave a Reply

Your email address will not be published.