>On December 10, BTC futures trading went live. The first set of those contracts is set to expire tomorrow, January 17.
>As the price of BTC was ~$15,000 on Dec. 10 , the first BTC futures contracts, which expire tomorrow, were fixed at about that same price. In a simplified form, this means that tomorrow:
>the "short" side of those contracts must give the "long" side a BTC (which could simply be bought at tomorrow's market price) [Edit: as others have pointed out, these contracts are cash settled, so the "short" side doesn't actually swap a BTC - it just pays the BTC market price at expiration. However, the net result is the same either way] ; and
the "long" side of those contracts must pay the "short" side $15,000 in return.
>Now imagine you are a large hedge fund evaluating these contracts, and the crypto market as a whole, on Dec. 10. Obviously, making a large bet on either the "long" or "short" side is extremely risky, since the price of BTC when the contracts expire (January 17) could very easily be $50,000 or $500. This makes large bets on either side a bad option for a large institutional investor like yourself.
>However, you also know that crypto is still an emerging market with a large amount of new investors and "dumb money." And because you are a large hedge fund, futures contracts opens the door to a third option: make large bets on BOTH sides to gain risk-free market leverage, use that leverage to manufacture market chaos, and profit on the near-guaranteed ripple effects of that chaos with virtually no risk. Here is how:
Bet big on the "short" side of the futures contracts on Dec. 10. Let's say you do this for 10,000 BTCs. This means that on January 17 you will owe 10,000 BTCs (Edit: cash equivalent) to the "long" side of those contracts, receiving $15k per BTC ($150,000,000) in return.
On December 10, BTC futures trading went live. The first set of those contracts is set to expire tomorrow, January 17
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>Buy an equally large amount of BTC on Dec. 10 at the market price ($15k/BTC). This cancels out your risk/reward for the futures contracts entirely, making you immune to all changes in BTC's price while you hold both the contracts and BTCs. This also allows you to accumulate and hold an extremely large portion of the BTC market while taking essentially no risk.
>Shortly before your futures contracts expire, dump all of your 10,000 BTC on the market at once. Like clockwork, this will trigger stop-losses and panic sells from the consumer BTC market, virtually guaranteeing that the BTC price will continue to dip well below whatever price you just sold those 10,000 BTC for.
>Ride that dip you just created to buy back the 10,000 BTC for much less than the price you just sold them for. This is particularly easy, since the funds you need are already liquid and ready to get back in the market.
Use the re-purchased 10,000 BTC for the expiring futures contracts, which get swapped for your initial investment ($15k/BTC). The difference in the price that you sold the 10,000 BTCs to start the dip from the price that you bought the BTCs back during the dip becomes your net profit.
on IB, I had to have a $50,000 margin to short Bitcoin
I still did it, up $3000
Quality post OP, too bad biz os just full pink wojack tards now
Is this the new cycle now? So we can expect monthly wild swings due to futures. In that sense I don't think the price would get too low, otherwise this scheme wouldn't be sustainable as more and more people exit the markets.
Unlikely, this is when the game goes up another level. Basic fundamentals and stuff that may have been applicable in the last few years may not be as applicable.
Remember, if one person is long on these contracts, another has to be short. I am guessing it's mostly professionals at this point so they are literally going up against each other. Whats to say the counter party didn't put up a sell wall?
it's hard to short, the margin requirement for shorting is $50,000 on IB, but for being long it's only $9,000
I hope they revise it down to like $25,000 at most
So money is leaving the unregulated trading platforms and going into regulated platforms?
Got it, just sold 100k
Not entirely. They would still need to get the coins from unregulated ...for now...
Bitcoin futures are not something new, they existed on OKCoin for years. Newfags just discovered that someone takes advantage of market volatility, what a surprise.
just tell me
will it recover or is this the end?