> As investors rush into bitcoin, some big Wall Street banks are hitting the brakes.
This metaphor sounds as if they're taking an affirmative step to halt the "rush." But they're just not opting-in to this new futures offering. If we need to stick with this metaphor, let's try "some big Wall Street banks are coasting."
This is worth paying attention to though, the CFTC has traditionally had a lackadaisical approach to approving financial products, where other agencies are typically risk averse and out in much more rigor
This has led to Congress itself banning futures products
There are two futures contracts explicitly banned in the US, and another could easily ride into the tax reform bill
(Speculating on how many movie tickets would sell for a new movie, would be a great way to hedge and speculate)
This was shut down by congress right before it started, last minute addition to the financial reform bill while simultaneously getting the all clear from cftc
The article alludes to this at the end but doesn't talk the real reason head on. As these are leveraged products the banks are exposed to large swings in the contract price via various clearing mechanisms. So they are looking at the volatility and asking what happens when someone doesn't pay and we have to step in and cover them. BTC is a bit of a volatile underlying. If I was in clearing risk I would be worried too.
It's a pretty big brake from the point of view of institutional investors. If none of my brokers offer access I simply can't trade it - it stops volume going through the futures.
Futures volume will drive volume in the underlying if only as Sneaky Sneaky People attempt to arbitrage using the hilariously manipulable price of bitcoin
The argument mostly boils down to that most rational actors will only tolerate a +/-N% change over the lifetime of a futures contracts
So the average future contract +/-N% (overall futures) roughly becomes the maximum volatility you can see out an asset over that duration. If it is exceeded people may stop trading futures, lowering the number of swaps, and by extensions trades of that asset. Providing a method to -let steam out- of a volatile system.
From the very link you posted, "Because futures contracts offer assurance of future prices and availability of goods, they provide stability in an unstable business environment."
Futures trading allows better price discovery, and generally improves the market for the underlying by contributing liquidity, especially from speculators.
(This is true for most commodities, but I think it could potentially be false for BTC depending on the way hedging transactions are logged and computed.)
I think you are joking but I don't think this is out of line with the original vision. Wall Street still will not control the block chain, and there was never any intention of excluding anyone from its use.
Yes Goldman would be a clearing broker; by selling I meant more like offering these futures to their clients as a product, so selling was more in the retail meaning of selling a product/service than the financial one.
Funny yesterday's bullish news about bc, and the accompanying spike to 19k, and today's bearish article, coinciding with a drop back to 15k. It's almost as if some large players are testing the waters on whether they can manipulate the price easily...
They not "long-only" futures. One particular broker has decided they're going to let their customers have long positions in the future rather than short, that's all.
Spend time investing in yourself and your skills, and put your money in something like VTSMX, Vanguard's extremely low-overhead total stock market index fund.
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[ 3.4 ms ] story [ 84.7 ms ] threadThis metaphor sounds as if they're taking an affirmative step to halt the "rush." But they're just not opting-in to this new futures offering. If we need to stick with this metaphor, let's try "some big Wall Street banks are coasting."
Lol
This has led to Congress itself banning futures products
There are two futures contracts explicitly banned in the US, and another could easily ride into the tax reform bill
(Speculating on how many movie tickets would sell for a new movie, would be a great way to hedge and speculate)
This was shut down by congress right before it started, last minute addition to the financial reform bill while simultaneously getting the all clear from cftc
Futures volume will drive volume in the underlying if only as Sneaky Sneaky People attempt to arbitrage using the hilariously manipulable price of bitcoin
Futures stabilize the price of the underlying commodity.
So the average future contract +/-N% (overall futures) roughly becomes the maximum volatility you can see out an asset over that duration. If it is exceeded people may stop trading futures, lowering the number of swaps, and by extensions trades of that asset. Providing a method to -let steam out- of a volatile system.
——
There are many examples against this (housing crisis 2008). The main example for is Chicago future exchange in the 70’s and 80’s http://www.econlib.org/library/Enc/FuturesandOptionsMarkets....
I was trying to show there was support for them providing stability, as for them failing to do this.
(This is true for most commodities, but I think it could potentially be false for BTC depending on the way hedging transactions are logged and computed.)
After they buy, who is there to sell to?
Pick your peak... do unload.
EDIT: I know it’s legal for equity options, where retail traders need to be eligible to be able to write options.
If interested in Bitcoin have Bitcoin. If interested in synthetics buy this. Counterparty risk plus plus.
Spend time investing in yourself and your skills, and put your money in something like VTSMX, Vanguard's extremely low-overhead total stock market index fund.
The only winning move is not to play.
Put your money in an FDIC insured monkey-market or savings account with no attached fees and a decent interest rate.
If it’s a scam, whatever. You had fun. ;)