Hedge Funds prepares to negotiate against Bitcoin – tech2.org

Hedge Funds prepares to negotiate against Bitcoin


A big bitcoin short is being built.

The planned introduction of bitcoin futures contracts in CME Group Inc., Cboe Global Markets Inc. and Nasdaq Inc. will make it much easier to bet on a decline. Hedge funds, which have largely remained on the sidelines, are waiting for the futures market of the Chicago Mercantile Exchange to open a new opportunity to bet against the cryptocurrency, according to more than half a dozen people who trade the badets .

"Futures reduce the friction of falling short more than it does long, so it's probably net bearish," said Craig Pirrong, a business professor at the University of Houston. "Having this instrument that makes it shorter could keep the price of bitcoin a little closer to reality."

Bitcoin has earned millions of percentages since it started trading in 2010. An investment of $ 1 at the beginning would now be valued at more than $ 1.4 million. A dollar invested in the S & P 500 stock index for the same period would now be worth less than $ 4, including dividends reinvested.

Some see the bitcoin market as "one of the best short-term opportunities," said Lou Kerner, a Flight VC partner who invests in cryptocurrency. "You have a lot of fanaticism and a lot of people, including myself, who believe that it is the best thing that has happened in the history of humanity, you have many people who think it is a bubble and a Ponzi scheme. be right. "

For more: Bitcoin is going to Wall Street if the regulators are ready or not

Bitcoin has been especially volatile Recently, it fell almost a 20 percent in less than 90 minutes on November 29, at $ 9,009 after briefly exceeding $ 11,000. Since then, the price has recovered and was quoted at more than $ 11,300 starting at 10 p.m. New York time on Sunday.

CME contracts will debut on December 18. Nasdaq plans to offer futures in 2018, according to a person familiar with the matter, while Cboe has not announced a start date. The Cantor Exchange of Cantor Fitzgerald LP is creating a bitcoin derivative, and the startup LedgerX already offers options.

Ari Paul, co-founder of hedge fund BlockTower Capital and former portfolio manager of the endowment at the University of Chicago, said people are wrong if they think the famous volatile cryptocurrency is a clear short.

"While some operators are anxious to shorten bitcoin and will do so when futures are released, there is a much larger amount of money anxiously waiting for the future as a vehicle to go long," Paul said.

& # 39; Small Potatoes & # 39;

There are limited ways to save bitcoin today, said Michael Moro, CEO of Genesis Global Trading. The cryptocurrency trading platform has lent around $ 20 million to investors to take bearish positions, which were mainly to hedge existing bets, he said. Companies such as GDAX, BitMEX and Bitfinex allow investors to buy badets in margin for short periods.

"With the existing exchanges, nobody can enter and reach $ 1 million," said Moro. "It really is not much about what you can do today, the CME guys open a new frontier."

The 90 percent increase in Bitcoin this year has triggered a series of Wall Street reactions. JPMorgan Chase & Co. CEO Jamie Dimon called the cryptocurrency "a fraud", while bulls including Thomas Lee of Fundstrat Global Advisors and hedge fund manager Michael Novogratz predicted further increases.

For more: Novogratz says that crypto will be the biggest bubble of life

The ability to reduce the currency is "an important part of the ecosystem," said Novogratz, who recently started to raise $ 500 million to invest in cryptocurrencies. Novogratz, a bitcoin believer in the long term, has said that short exchanges can be risky.

"There's a lot of foam," he said at a cryptocurrency conference last week in New York. "This is going to be the biggest bubble of our lives."

Short sellers essentially borrow a value, betting that the price will go down and they can pocket the difference when they return the stake. The strategy carries risks. Borrowing bitcoin can be difficult and the price changes suddenly, said Moro of Genesis.

"The concept is that this is such a volatile market that it will scare many investors," said Kerner of Flight VC. [19659002"InvestorscouldbescreenedasthosewhoplacedthemselvesintheInternetbytheendof1990"saidAaronBrownemanagingdirectorofAQRCCapitalManagementwhoinvestedintheencryptedcurrency

. "People who had a short on the Internet in 1998 were right, but they broke up before they could make any profit," Brown said. "One of the problems with this, if you think it's a bubble or a Ponzi scheme or whatever, can last a long time."

– With the help of Erik Schatzker

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