Since futures are cash settled, this will never happen. This will just be a psychological trading game that that traders play with each other. It has nothing at all to do with real Bitcoins. They might as well call this future YUM-YUMs
It is all there. http://www.cmegroup.com/trading/files/bitcoin-reference-rate-methodology.pdf I would not be surprised if they really can make it happen by end of 2017.
What's the reason for a contango in BTC futures? Risks associated in holding the cash on unregulated exchanges? I'm with @bone that especially on expiry there can be substantial manipulation. If people can manipulate broad stock indices and single stocks on expiry level (though on a smaller scale) then it's definitely possible with BTC.
No I don't agree with that... the fact it's cash settled just means at expiry there will be some rollover issues, since the hedge stays put. Whether cash or physically settled, in an efficient market the spot and future will be very closely related, depending on how easy it is to hedge. So, maybe there will be some room in the EFP, but hedging will mean they relate. If futures get more volume, due to it being more available to the public and can accommodate larger underlying size, it will start to lead the spot... biggest volume drives the market, the swings in the lesser volume product will be absorbed in the arb.
Yes, holding the future with a continuous roll should be synthetically more expensive then holding the spot to account for risk. If it's not, you should absolutely not hold BTC. If you are going to take the risk you need to be paid for that risk. So the forward curve will have a risk premium meaning every month, just like in the VIX, it's going to cost you to roll forward. Furthermore, if I can buy the Dec 2020 BTC futures at the present value of the spot then you should absolutely take the futures over the coin. I suspect there will be a hefty premium at first on the futures and over time it will get tighter and tighter.
Yeah I agree manipulation will be less of an issue. The coin is not that liquid. There is decent slippage cost. So it's going to cost a decent amount of money to move the coin to try to move the index value. We use cash settled indices in energy with a weighted settlement. It's very hard to manipulate prices.
You could be right but it still seems to me that Bitcoin is a totally different animal. The real price is what one person is willing to accept to part with a bitcoin. Perhaps the futures market will influence the real Bitcoin owners but without any physical delivery component to the futures market, it is still just play money.
The cash settlement is at the spot price at closing. Think of it this way, if the spot price is 10% less than the futures price 10 seconds before closing, you can buy the spot and sell an equal amount of the future. In 10 seconds you'll make 10% risk free no matter what happens in the interim. You do the opposite is the spot is less than the future. The presence of a risk free arbitrage opportunity will be arbitraged away by the people here if no-one else, so the prices will converge toward expiration. Any difference further out probably represents the relative risk of a Bitcoin exchange vice the safety of CME. Physical delivery is not necessary to make prices of futures converge with the spot, they do it with striking regularity with every single cash settled future and there's no reason to won't be the same here.
IMHO, everyone should just STFO about what is going to happen with the CME futures thingy. We just don't know what is going to happen yet. Let us sit and wait to see.