>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?
what r u? 16?
they don't have to pay the margin in ur internet shekels.
they pay in dollars
It's a Plebbit pasta, sorry to dissapoint.
>would still need to get the coins from unregulated
What does that mean? If im trading a futures contract, im trading on the SPECULATION that thing will go long or short. Has nothing to do with 'getting' any coins
Unfortunately no, this would not happen. You cannot accumulate 10,000 BTC over a short time period without inflating the price
Yes you can, in dark pools.
I was only talking about the example in the OP. Where he went Long physically. Its true in standardised futures you cash settle.
Oh when it comes to market manipulation? Yeah I see
Also thinking about this more, I swear to write thhese options there used to be some law that states you need a reserve of some sort? I can't remember specifically but it was reduced / removed like 20 - 40 years ago....
It depends how you look at it. Derivatives were not always stigmatised as something made out of thin air by the jews to take your money. Its meant to create liquidity. Grease the wheels of production if you will.
Example they teach in school for commodities future is: farmer is in planting season. If he can get $10 a kilo for potatoes he would make $100k.
Of course he doesn't know whether it would be $10 a kilo or not when he harvests. So he would short his potatoes now for $10 a kilo and grow enough for delivery during harvest.
Now he's locked in $10 a kilo and he can safely plant.
If no one knew who would take the risk of planting a farm's worth of potatoes that might be worth $1 a kilo in the future?
Look up naked short selling.
In an economical sense, you can use it to safeguard your future investments just like the Bank uses inflation/interest rate for the economy.
But in the end, aren't we just 'hoping' things will get better in the future? Isn't the American financial system built on hopes that future will pay itself off?
How can you bet on Bitcoin not crashing tomorrow? Or that the financial system isnt stable any longer? The only people who can do real betting are the ones who in control of those data points, just like in any market
"Who controls the past controls the future. Who controls the present controls the past"
Nice just bought 100k
I think this is what Thiel's fund has been aiming to do since last summer. I also think he is now going to flood particular alts (based on his fund manager's statements).
It's not really hoping. It's hard to talk about it outside a simplified model. Take the farmer example for instance. If he doesn't know how much he's going to get from the potatoes, why would he grow any? The country's GDP is now less because that production channel has now stopped.
Don't think about it in terms of betting and instead hedging risk (what it was designed to do to begin with). I'll use a real life example of KFC accepting Bitcoins + your scenario of the bitcoin market crash.
KFC Canada is accepting bitcoins for KFC. Now you can say they are contributing to the success of crypto. If I was KFC, I would short some bitcoins now to a value that I am expecting to hold in the end after the promotion.
From the above, everyone wins.
1) Crypto starts being used in everyday transaction.
2) If it is a perfect hedge, KFC gets in FIAT, they expected at the start of the promotion.
If say:
>they expected to get 1BTC of sales, and they priced it at $15,000 a bitcoin.
>market price at settlement date is actually $10,000
The bitcoins they received they can only sell for $10,000, but they get an additional $5k from the person they entered the future with.
They get $15k as expected, and they maintain their profit in the chicken selling business.
3) The guy that bought the futures off him gets $5k, he is actually taking the risk in this example.
>Guy actually loses the $5k, he took the risk and got left with KFC bags.
Just buy EGAS and hold it...13mil max supply and the price is sub $0.10 - at $1 it will only be 13mil market cap and even if it turns out to be a scamcoin thats still 10x returns.
Take a look@ coinmarketcap.com
I really like EGAS, it looks like a scamcoin but even if it is, at this price it can still go 10x before it gets dumped. check it out.
Take a look@ coinmarketcap.com
Futures markets reduce volatility
Stop shilling this shit in every thread cunt
just switch to Bitcore (btx). it has 20mb blocks + 20mb segwit
So by hedging more risk, you are actually protecting it from being volatile by investing in the possible consequences of that investment?