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Ask HN: BTC futures are announced by CBOE and CME. What can go wrong? Discuss

6 points by TooSmugToFail ↗ HN
What's your view on BTC futures? Big players betting big money on crash, and manipulating the (still illiquid) crypto market to realize gains? Miners/Whales playing both sides (fiat futures and crypto exchanges) to their gain?

Or you have a more bullish view? I'd love to hear some fresh thoughts...

6 comments

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Order
I'm of two minds on this.

With the futures market being a place that individuals can trade non-public information for a profit, and the history of Bitcoin being tied to criminal activity (drugs, ransom ware, etc.), I see a potential for market manipulation. The value of Bitcoin is still extremely volatile; due to the inherent anonymity and media presence surrounding the asset, the ability to trigger a price swing and make a killing in options is a reality.

On the other hand, estimated illicit transactions have decreased substantially due to the evolving ability for law enforcement to track down individuals from Bitcoin transactions (worth noting that I couldn't find solid numbers on this). If this realized reduction of anonymity thwarts most attempts at market manipulation, I'm thinking that these futures can help Bitcoin more quickly find stability in the world market.

TooSmugToFail
I'm not decided either.

One of the scenarios certainly is an implicit regulation of BTC (and with time Ethereum) trading. Currently, I'm not sure the authorities can call market manipulation happening on the crypto exchanges. But with futures being out there, traded on a regulated market, then manipulating the underlying would surely qualify as market manipulation (not an expert on US securities regulation).

But this is just one aspect. I'm wondering how soon it will take for us to see various trading strategies playing both sides of the market (crypto/fiat), and what effect will that have on the price in the short term, and the future of BTC going forward.

infinii
I really wish people would stop using this "bitcoins used for illegal activities" narrative. USD is used for illegal activities and on a much larger scale yet nobody talks about it.
rajacombinator
My 2c: concern is that btc futures becomes like gold futures which are totally fraudulent and used to manipulate the market. But gold is a bizarro land that’s cash settled vs paper or something super absurd. There’s not really a functional way to short “physical bitcoin” right now that I’m aware of other than participating in the tether scheme. So even if the NY Fed, for instance, came in and blasted the bid on cme btc it’s not clear it would affect the physical market. Overall I think it’s bullish just for increasing exposure of investors to btc.
TooSmugToFail
I was also decidedly bullish initially (on the exact same grounds that you're describing), but I'm increasingly aware that this can be flipped the other way too.

For example: let's say the BTC futures price is lower than the exchange price, and let's say you hold BTC; pursuing an arbitrage, you buy cheaper futures, sell BTC to make arbitrage profit; multiply this across many self-serving market agents, and you have market forces working to eliminate the arb opportunity: there's our transmission mechanism, regardless of how the futures are settled.

Top19
There was a full-page ad placed in the Wall Street Journal (those run something like 150k) by a hedge fund manager begging the CBOE to not let Bitcoin on. This was within the last 4 weeks.

I wish I could share a picture of the article but the gist of it was “could cause a sell-off that would spread to the entire CBOE and cause a total collapse”.