Futures are regulated. Bitcoin is unregulated. So, how can bitcoin futures be allowed by the regulators? The underlying is unregulated, so how can the derivative be regulated? I simply cannot understand how this can be allowed. I can't put a finger to it but I don't have a good feeling about bitcoin futures. What are the dangers posed or have bitcoin reach mainstream since futures are going to be available?
Banks are unable to offer bitcoin trading due to KYC rule. There are a few counties that do require identification when opening a wallet, however this is "recent". Your normal arbitrage model is skewed to the sell futures and buy BTC. I dont think you can do it the other way round, unless you can borrow BTC. It is all very odd.
learner88 The "underlying" is a based on a real time index with an end of day Reference Rate. It is also cash settled. Going to be crazy the 1st week.
The real reason is, the greedy bastards want to capture the fees. They also allowed massive obvious fraud in the pinks sheets for decades for the same reason.
This is completely one sided, since you can short the underlying (BTC). This is the prefect tool for HFT capturing the arbitrage spreads. Who ever has the fastest connection has the advantage.
Volatility is unregulated. Yet there are regulated volatility futures. The underlying doesn't need to be regulated or physically exist.
I agree and my thoughts go to how will they deal with extreme bitcoin value gyrations? If futures, you have a "Limit Down" threshold where the market closes and trading stops at -20%. If bitcoin drops to -20%, the futures market has no control over the actual index, so if they freeze trading, bitcoin will still be active to move down below 20%. This would force futures holders to watch while being locked out of trading or exiting. Are they making the derivative free from Limit Down restrictions and have it trade around the clock? I'm really curious how they are going to manage shorting without putting the brokerage at risk in case of a runaway market/huge gap up. I suppose with longs, 100% margin will be required.
Limit-down risks are worth bearing in mind when trading bitcoin futures. If bitcoin futures goes limit-down for 3 consecutive days, the traders are going to lose sleep for 3 days. You can't get out even if you want to. You can't sleep even if you want to.
This is a good point, but, and there is always a but.... Volatility is a simple calculation and can not be banned or manipulated (I assume). So is the weather futures. Not true with cryptos. What happens if the US government outlaws bitcoin as currency?(but not as investment, as Chine did) What if they completely outlaw it so you can't even own it in the US? Will the futures cease to exist? Until the US government takes an official stand on cryptos in general, the introduction of futures is premature. But they want to collect commissions. TL; DR: not all non-physical futures are equal...