Bitcoin futures market and it's effect on price

[Jimmy1986]

What are everyones thoughts on the upcoming Bitcoin futures markets and it's effects on the price of Bitcoin? Is this going to tame the market and stop the kinds of gains that we have seen in 2017 or will it be good for the price?

Part of me is thinking it's going to slow everything down quite a bit price wise... but I hope I'm wrong.

Thoughts?

Cheers Jimmy

 

[Brendio]

From what I've read, it is not really a futures market so much as a CFD. Settlements are all in fiat. I think the effect would be different if the futures contracts actually involved crypto delivery.

 

[leo25]

The vast majority of gold futures are cash only settlement based on virtual contracts, yet it still heavily dictates the gold price. So i see no reason why Bitcoin will be any different.

 

[Jimmy1986]

From what I've read, it is not really a futures market so much as a CFD. Settlements are all in fiat. I think the effect would be different if the futures contracts actually involved crypto delivery.

Thats what i've heard too, so wouldn't this suppress the price of Btc?

 

[Brendio]

Theoretically, it shouldn't matter either way, because if the futures trade at a significant premium to actual bitcoin on exchanges, people could arbitrage by buying on an exchange and shorting the future, and vice versa when the future settles. The problem I see is potential for manipulation, because you wouldn't need bitcoin to short it. If there is more demand for people shorting it, it could cause uncertainty for bitcoin buyers. There are already services that allow shorting bitcoin. This would probably just allow it on a larger institutional scale.

For long-term HODLers, it could create a buying opportunity.

 

[dozerz]

exactly this, manipulators. just take the recent bcash fork and how the bcash "ceo's" successfully manipulated the market. imagine a huge future short behind that and theres even more incentive. the other indicator is a sign of maturity, that bitcoin has not been able to be controlled, remains decentralised and this is another step in its maturity as a new asset class.

 

[Andy28]

exactly this, manipulators. just take the recent bcash fork and how the bcash "ceo's" successfully manipulated the market. imagine a huge future short behind that and theres even more incentive. the other indicator is a sign of maturity, that bitcoin has not been able to be controlled, remains decentralised and this is another step in its maturity as a new asset class.

Shorts are the scariest thing. There are plenty people/groups who can single handedly manipulate the price. It doesn't take as many bitcoin as you would think to cause a sharp drop. I feel like this play is almost inevitable. I also think following something like that will be a good time to buy, as it will certainly go back up, perhaps even more strongly....before happening again etc.

 

[wrcmad]

The vast majority of gold futures are cash only settlement based on virtual contracts, yet it still heavily dictates the gold price. So i see no reason why Bitcoin will be any different.

Really?
LBMA, COMEX, Shanghai Futures Exchange, and Shanghai Gold exchange make up 98.5% of daily notional gold volume, and all specify physical delivery.
Of the remaining 1.5%, larger ones like Dubai, India, Russia, and Tokyo specify phys delivery.

Just wondering which "vast majority" of gold futures contracts you are referring to that are cash-only settlement??

 

[leo25]

LBMA, COMEX, Shanghai Futures Exchange, and Shanghai Gold exchange make up 98.5% of daily notional gold volume, and all specify physical delivery.

Good to know you inspect all the gold getting "delivered" for every contract sold.

Next you will tell me that Tether has a dollar for every token sold

 

[wrcmad]

Good to know you inspect all the gold getting "delivered" for every contract sold.

Next you will tell me that Tether has a dollar for every token sold

Evasive answer....
Tell me more about the things you make up, then post here as disguised as fact.

 

[leo25]

Evasive answer....
Tell me more about the things you make up, then post here as disguised as fact.

Even more of an evasive answer
Tell me more about the things you make up and things you blindly believe.

btw i love you definition of "facts". Numbers from Wikipedia that are referenced from an untrusted organisation . I guess you really thought Ben Bernanke and rating agencies were telling the truth in 2007/08 haha. Btw Santa will be here soon.

 

[wrcmad]

btw i love you definition of "facts". Numbers from Wikipedia that are referenced from an untrusted organisation .

Nope. I don't use Wikipedia.
It is edited by numptys like yourself.

Still waiting to hear about the "vast majority" of cash-only settlement contracts. ​

I know I will be waiting a long time.

 

[leo25]

I know I will be waiting a long time.

I know you're computer illiterate so i did a quick search for you.

https://www.danielstrading.com/futu...14/01/03/physical-delivery-vs-cash-settlement

At the end of the contract the holder of the position will either have to deliver the physical commodity if short or take delivery if long. It is estimated that only 2% of all futures contracts are actually delivered.

I don't know why this is even news to you? it's been well known for a long time that there are more contracts then there is physical metal. Next you will be telling everyone fractional reserve banking is not real and the earth is flat.

btw I'm still waiting to hear where you got your info from?
I know I will be waiting a long time.

 

[wrcmad]

At the end of the contract the holder of the position will either have to deliver the physical commodity if short or take delivery if long. It is estimated that only 2% of all futures contracts are actually delivered.

No shyte Einstein, that's because most positions are closed out before expiry. It's a market used primarily for hedging.
If buyers want to buy, they don't bother doing it on COMEX.... they go to a dealer.

I don't know why this is even news to you? it's been well known for a long time that there are more contracts then there is physical metal.

Total BS.
Educate yourself.

Now... what ever happened to that "vast majority" of cash-only settlement contracts?

 

[leo25]

No shyte Einstein, that's because most positions are closed out before expiry.

Thanks for confirming my point. Thus most contracts are closed out and settled in cash only. Since most orders have no interest in ever buying the real metal and taking delivery, they know they can create virtual contracts.
What are you not understanding?

Thus I'm saying the same with bitcoin. Some think they need to really have bitcoin and all I'm saying is that they don't providing that most have no interest in delivery. Though with bitcoin, the CME have stated that it will ONLY be cash settled contracts, so you won't even have the option to deliver.

 

[wrcmad]

Thanks for confirming my point. Thus most contracts are closed out and settled in cash only. Since most orders have no interest in ever buying the real metal and taking delivery, they know they can create virtual contracts.
What are you not understanding?

I now see what your not understanding.

Closing out a contract is not a contract settlement.
Thus, it does not constitute cash settlement, but merely constitutes entering another contract in the opposite direction.
So your point is mute.

Settlement is made on deliveries.
And there does not exist a "vast majority" of cash-only settlement contracts.

BTW, contracts are not virtual... it is a contract for a real transaction, and price is anchored by arbitrage to physical.

Hope that clears it up for you.
Whenever you read permabull misinformation, take all the rhetoric with a very large pinch of salt, because it will always be twisted out of context in the interests of their motives. They will use deceptive semantics and construe terminology to create false realities to suit their arguments, and repeating any of it can often sound dumb.

 

[leo25]

Closing out a contract is not a contract settlement.
Thus, it does not constitute cash settlement, but merely constitutes entering another contract in the opposite direction.

I meant closing out, so yes that's my bad for using the wrong word. But what i was trying to express still remains.

Settlement is made on deliveries.
And there does not exist a "vast majority" of cash-only settlement contracts.

CME have stated in their own words that Bitcoin contracts will be settled in cash only. So maybe you should call them up and tell them to rephrase.

BTW, contracts are not virtual... it is a contract for a real transaction, and price is anchored by arbitrage to physical.

No this is not true today, though it was true a long time ago. There are more contracts then there is physical of anything, so if hypothetically everyone asked for delivery there would not be enough to cover all contracts and thus most (but no all) are based on virtual stuff.

Whenever you read permabull misinformation, take all the rhetoric with a very large pinch of salt, because it will always be twisted out of context in the interests of their motives.

Where did i ever say it was only used to make the price go down? it's mainly a gambling tool these days (long or short). So just to be clear, i don't think metals are manipulated just down. So it's best to not make assumptions next time.

 

[wrcmad]

The vast majority of gold futures are cash only settlement based on virtual contracts, yet it still heavily dictates the gold price. So i see no reason why Bitcoin will be any different.

CME have stated in their own words that Bitcoin contracts will be settled in cash only. So maybe you should call them up and tell them to rephrase.

Apologies.
I thought when you stated "The vast majority of gold futures are cash only settlement", that you meant "The vast majority of gold futures are cash only settlement"? I didn't realise you were secretly referring to BTC futures.
Maybe you should rephrase your above post?

No this is not true today, though it was true a long time ago. There are more contracts then there is physical of anything, so if hypothetically everyone asked for delivery there would not be enough to cover all contracts and thus most (but no all) are based on virtual stuff.

Don't try to conflate a "contract to trade physical", with "physical" itself - they are nether one nor the other.

I don't talk hypotheticals... it is a weak argument.
However, to entertain your hypothetical, it is an impossibility in more ways than one:

Only the current month contract is subject to delivery... so COMEX has always been covered by multiples.​

The bulk of OI is not in the current month at expiry, so everyone can't ask for delivery.
Furthermore, longs can't ask for delivery through COMEX anyway, only shorts can initiate delivery...
And if you think a contract to trade physical is "virtual", then maybe you should enter one of these contracts and see how very quickly it becomes real?
so the argument is totally flawed in many ways.

 

[leo25]

Apologies.
I thought when you stated "The vast majority of gold futures are cash only settlement", that you meant "The vast majority of gold futures are cash only settlement"? I didn't realise you were secretly referring to BTC futures.
Maybe you should rephrase your above post?

A future contract is a future contract, be it Bitcoin, Corn or Gold. If the CME says that a contract can be settled in cash, then it can apply to all. If you have an issue with that wording or action then i suggest you give the CME a call. I don't write the rules.

 

[wrcmad]

A future contract is a future contract, be it Bitcoin, Corn or Gold. If the CME says that a contract can be settled in cash, then it can apply to all. If you have an issue with that wording or action then i suggest you give the CME a call. I don't write the rules.

Nope.
You are either making this up as you go, or someone fed you a big load of BS and you ate it all up.
It is clear you don't write the rules, as the rules don't resemble anything you have said in this thread.
The CME does not say gold contracts can be settled in cash - it is very specific about physical delivery, delivery terms and specs.
Cash settlement does not apply to all contracts - each contract has it's own specs.

I gave them a call . They referred me to this section of the CME rule book Link
Just as I had already stated, it couldn't be any clearer that delivery is physical only:

Chapter 113
Gold Futures
CONTRACT SPECIFICATIONS
The contract for delivery on futures contracts shall be one hundred (100) troy ounces of gold with a weight tolerance of 5% either higher or lower.
Gold delivered under this contract shall assay to a minimum of 995 fineness and must be a brand approved by the Exchange.
Gold meeting all of the following specifications shall be deliverable in satisfaction of futures contract delivery obligations under this rule:
1. Either one (1) 100 troy ounce bar, or three (3) one (1) kilo bars.
2. Gold must consist of one or more of the Exchange’s Brand marks, as provided in Chapter 7, current at the date of the delivery of contract.
3. Each bar of Eligible gold must have the weight, fineness, bar number, and brand mark clearly incised on the bar. The weight may be in troy ounces or grams. If the weight is in grams, it must be converted to troy ounces for documentation purposes by dividing the weight in grams by 31.1035 and rounding to the nearest one hundredth of a troy ounce. All documentation must illustrate the weight in troy ounces.
4. Each Warrant issued by a Depository shall reference the serial number and name of the Producer of each bar.
5. Each assay certificate issued by an Assayer shall certify that each bar of gold in the lot assays no less than 995 fineness and weight of each bar and the name of the Producer that produced each bar.
6. Gold must be delivered to a Depository by a Carrier as follows:
a. directly from a Producer;
b. directly from an Assayer, provided that such gold is accompanied by an assay certificate of such Assayer; or
c. directly from another Depository; provided, that such gold was placed in such other Depository pursuant to paragraphs (a) or (b) above.

Hope this clears things up.