Why the Bitcoin market could be better without the CBOE futures contracts
There is no future in Bitcoin futures, at least in Chicago Boards Options Exchange (Cboe).
The largest stock exchange in the US UU He announced on Thursday that he would not add XBT futures contracts for trading in March 2019, 14 months after he included them. However, Cboe said his currently listed contracts would remain active. That means that XBTM19, the last registered contract of the stock exchange, will expire in June 2019. Excerpts from the statement:
“The Chicago Futures Exchange (CFE) is evaluating its approach to how it plans to continue offering derivatives of digital assets for trading, but considering its next steps, CFE currently does not intend to list additional XBT futures contracts for trading”.
The skeptics took Cboe’s decision as a sign of the de institutionalization of bitcoin, arguingthat the overcrowded run off of the cryptocurrency was a deviation for the US futures market. Market analyst Alex Krüger called the episode “unfortunate”, while a consensus among bitcoin bears blamed the over burdened crash of the cryptocurrency for the exclusion of Cboe.
However, it is essential to understand the factors that led Cboe to eliminate bitcoin futures. The volume is, of course, the main one.
A disinterested lot
One has to learn that Cboe, in the end, was offering a commercial product. He could not have faced an exclusion from the list if the demand was high. The data shows that Cboe’s bitcoin futures volume has never exceeded $ 2 billion since its launch. On the other hand, the demand for a similar product offered by the Chicago Mercantile Exchange (CME) was much higher.
In general, the big difference between Cboe and CME explains why the former had to resign. It was simply an unpopular product, first of all also confirmed by Cboe’s warning thatit did not reveal why bitcoin futures were being excluded.
However, we do not believe that the bitcoins futures in CME are going better. The exchanges published large volumes probably because they offered attractive discounts /incentives throughout 2018. Their offers expired in February 2019, so there could be the possibility that CME follow the steps of Cboe.
The deinstitutionalization of Bitcoin is a myth
In contrast to what skeptics believe, the elimination of bitcoin’s future products does not harm abit to the bitcoin value. These products are settled in cash, which means that speculators do not buy or sell real bitcoins in the process. On the contrary, they simply bet on the future value of bitcoin. Consider this example to understand it better:
Suppose that BTC is quoted at $ 3,000. Asset futures in CME are available for $ 3,100 and expire in one month. A bullish trader, let’s say, decides to buy two futures contractsfor $ 6,200. Mean while, a bearish trader decides to fire two futures contracts for $ 6,200. At the time of the expiration of the contracts, the BTC price reaches $ 3,500. As a result, the bull merchant makes a profit of $ 1,000, bringing the final amount to $ 7,200. At the same time, the bearish trader has to pay $ 1,000 for his loss, reducing his capital to $ 5,200.
Through out theprocess, not a single cent of bitcoins were exchanged or changed hands. On the contrary, the loser resolves the contract with the winner using cash. That explains the name of “bitcoin futures settled in cash”.
In contrast, the new bitcoin futures that would see a release this year would be based on the physical. It means that speculators would liquidate their contracts using the real bitcoin tokens. Firms such as Bakkt, Nasdaq, ErisX and CoinFLEX are ready to introduce their bitcoin trading platforms in 2019.
Disclaimer: InfoCoin is not affiliated with any of the companies mentioned in this article and is not responsible for their products and / or services. This press release is for informational purposes only, the information does not constitute investment advice or an offer to invest.