Five Things You Should Be Aware Of CME Bitcoin Futures
Nov. 29, 2018 Three:20 PM
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CME is launching Bitcoin futures ter December 2018.
Spil defined by the CME CF Bitcoin Reference Rate (BRR), Bitcoin future will have Five BTC spil contract unit.
Unlike Bitcoin exchanges, Bitcoin future will have a defined trading window and circuit filters.
CME Bitcoin future brings the option to brief Bitcoin.
1. How CME Bitcoin Future is going to function?
If a trader buys a bitcoin futures contract and hold it when it expires, nobody forearms overheen the Five bitcoins underlying the contract at the time of expiry. Instead of that, CME (NASDAQ:CME) computes a daily Bitcoin Reference Rate (BRR) which aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin spil of Four:00 p.m. London time, and if the Bitcoin Reference Rate at the expiry of underlying futures contract is higher than the BRR when he opened the contract, the investor get paid the difference (times Five), and vice versa.
The BRR is designed around the IOSCO Principles for Financial Benchmarks and Bitstamp, GDAX, itBit and Losbreken are the constituent exchanges that presently contribute the pricing gegevens for calculating the BRR.
This means that traders are “specie lodged” and they get exposure to bitcoin without everzwijn actually treating bitcoins.
Two. Who is going to brief Bitcoin futures?
Till now strenuous weight institutional investors have no choice to brief Bitcoin spil they do it for other commodities and stock futures. I am not expecting any major participation from retail investors, but most of the brief trades will be initiated by below two categories
Why miners: Every month, miners have to maintain their metselspecie flows to pay their expenses including electro-therapy and hardware costs. Unrealized profits always belong to market. If they believe that Bitcoin price is about to go down they could hedge their price by shorting a minimal percentage of holdings which can be covered zometeen. Since miners have meteen access to all “insider information”, I believe they could use Bitcoin futures aggressively going forward.
Why Institutional investors: Spil wij all know, many of the major institutional players like J.P. Morgan Pursue & Company (NYSE:JPM) are not so blessed about the latest price rise of Bitcoin. According to mij, they would be identically looking for shorting opportunities te Bitcoin. Any negative news te the entire crypto space will be “optimistically exploited” by them which can lead to substantial price correction.
Three. Bitcoin to Stabilize and Become More Popular
2018 is one of the best years te Bitcoin history. It has given almost 700% come back from the embark of the year, till date. CME is about to begin Bitcoin Futures te 2nd week of December which will make BTC more popular among mighty weight institutional investors. I am sure that December 2018 will be the month where Bitcoin registers its highest everzwijn volume recorded ter its history. Also wij should not expect exorbitant comebacks like 500% or 700% comeback from current level on an yearly ondergrond. Investors who bought below $3000 should not worry about any brief term fluctuations and sit taut with a zekering loss of $4500.
Four. Almost 120 Hedge Funds Concentrate Solely on Bitcoin
According to CNBC, and financial research rock hard Autonomous Next, the number of funds investing te digital assets like bitcoin has grown rapidly to 124 by October 2018. Thesis crypto-funds have about $Two.Trio billion ter total assets under management. Hedge fund managers are foreseeing powerful targets to BTC. For example hedge fund legend Novogratz has a target of $40,000 for BTC by the end of 2018.
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There’s a big wave of money coming, not just here but all around the world. Due to no supply response it is going to get exaggerated on the way up. There will be 50 procent corrections. It will get exaggerated on the way down spil well.
Michael Novogratz, Hedge Fund Manager
Merienda CME Bitcoin future is operational thesis hedge funds will stir to Bitcoin future market and wij can expect the asset under management would grow higher ter coming months.
Gegevens shows that the number of crypto-funds and their assets under management is still negligible compared to the $Trio.15 trillion hedge fund industry. Let us wait and see how much more funds will flow into crypto market ter the coming quarters.
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Bitcoin Wallet count graph from blockchain.informatie
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Five. Speculation to Increase Due to Margin Availability
Option players will have to keep less initial margin for a buy or sell Bitcoin future. At the end of the day, settlement happens from account to account on the onderstel of daily movements. For example, money moves from “brief contract” to “long contract” ter case of price rise and money moves from “long contracts” to “brief contracts” ter case of price fall. The margin is yet to be confirmed by CME, but wij can expect somewhere around 10% to 20%. This means that option players can buy a loterijlot (Five Bitcoins) of Bitcoin future at $Ten,000 if the market price of 1 Bitcoin is $Ten,000 at an assumed margin of 20%. Speculation on both long side and brief side will increase which would increase the volume and ter turn reduce the volatility.
Along with CME, CBOE is also coming with Bitcoin futures, which would make the space even interesting. I am foreseeing more Governments will commence looking at how to regulate the entire crypto trading. Any regulations would turn out to be a positive event for the crypto space. Spil long term investors, wij should not get excited about the price movement and wait till 2020 to see how the story unfolds. More than money and graphs, wij are following the story behind it – the decentralized, trans-national, one world currency.
Disclosure: I am/wij are long BITCOIN.
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I wrote this article myself, and it voices my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned te this article.