Cboe Bitcoin Futures trading impacting Bitcoin prices?
Bitcoin Futures and Big Investors
Today (1/17/18) marked the first official settlement of a CBOE Bitcoin futures (XBT) and short sellers notably made a significant profit on it.
[WARNING: 😴 😴 ahead: As a bit of background, futures contracts allow traders to speculate on the price of a commodity or asset (in this instance, a Bitcoin) by buying or selling the contracts. If a trader "shorts" a futures contract, he/she is selling the contract at today's price and then betting that the price will fall before he/she has to "fill" the contract.
In the old days, this meant that if I sold you an oil futures contract at $40, I promise to deliver you a barrel of oil for $40 by a certain date. I'd then be hoping that the price of oil would fall - to say $30 - so that I could net the $10 profit prior to delivery. I'd buy a barrel oil at $30 and re-sell it to you at $40. FIN 😎]
According to CFTC data, a number of large hedge funds "shorted" bitcoin leading up to the settlement of the first contract. A closer look at CFTC data indicated that the majority of the short position in Cboe came in recent days too, along with a huge spike in actual Bitcoin trading volume on the major exchanges.
What does any of this mean? This translated to all the short positions by hedge funds and institutional investors as coming up HUGE in terms of profit.
As one report noted: "On Wednesday, the official auction price for bitcoin on the Gemini Exchange was $10,900, compared with an auction price of $17,285.89, on Dec. 11, the first full day of Cboe bitcoin futures trading."
So who primarily lost on the other side? Interestingly smaller individual investors...
What does this mean for us "household" traders? Nothing yet.
I certainly DON'T have enough data to suggest any fishy happened BUT it will be interesting to see in the coming months if we can find a correlation between movement in Bitcoin futures short positions, Bitcoin price movements, and Bitcoin trading volume...
Stay tuned y'all. It's about to get really, REALLY interesting...
Nice first post @bigtx31!
The little guys always seem to get the short end of the stick. With increased involvement from hedge funds and banks, the more manipulation we'll see in the crypto markets imo.
I was reading yesterday of a couple of blockchain ETFs, an ETF based on blockchain companies. Hopefully they will have options.
Hmm interesting - would be a good way to have a more liquid investment in blockchain. Great find
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