One of the reasons that long-only patrons have succeeded throughout the Bitcoin market is that there is no environment friendly method to temporary big portions of Bitcoin. All that may change in a month’s time if CME launches its Bitcoin futures.
CME’s Bitcoin futures
CME’s announcement that it may launch Bitcoin futures in December 2017 provided a carry to Bitcoin’s price. The expectation is that Bitcoin futures would lend legitimacy to the asset class and also you presumably can see institutional patrons coming into the Bitcoin market. If Bitcoin futures had been approved by the CTFC, then it may even be troublesome for the SEC to block Bitcoin ETFs as the underlying would be a regulated asset.
However, Bitcoin patrons might be missing the aim. The launch of Bitcoin futures would provide bears with a way to temporary big parts of Bitcoin; one factor which they can not efficiently do instantly. Speaking to CNBC, Terry Duffy, the Chairman and CEO of CME acknowledged:
Today you can’t temporary Bitcoin. So there’s solely one method it’d go. You each buy it or put it up for sale to any particular person else. So you create a two-sided market, I imagine it’s always way more surroundings pleasant.
Margin shopping for and promoting at exchanges
While technically one can temporary Bitcoin instantly through margin shopping for and promoting at present exchanges, the liquidity and volumes at these exchanges often usually are not sufficient for large patrons. Exchanges equal to Bitfinex allow clients to borrow digital tokens and promote them, matter to totally different clients agreeing to lend the belongings to the margin vendor.
However, such exchanges are few and far between and most exchanges allow solely frequent searching for and selling, which favours standard long-only patrons. Also, many exchanges, equal to Bitfinex, don’t allow US citizens to margin commerce on their platform. Regulated futures create a whole new narrative, since these trades are cash-settled and temporary sellers wouldn’t have to really borrow Bitcoins.
Bitcoin futures may current Bitcoin sceptics with a method to temporary Bitcoin, nonetheless that does not suggest that it might be a worthwhile trade strategy. Given Bitcoin’s large volatility and penchant for sudden bull runs, futures might merely flip proper right into a bear lure in its place of providing bears with tooth. Even Jamie Dimon, who has attacked Bitcoin as a fraud and a bubble, has acknowledged that he wouldn’t temporary Bitcoin. In an interview in CNBC in September 2017, Dimon acknowledged:
I am not saying go temporary. Bitcoin might go contact $100,000 sooner than it goes down. So this is not (what you) advise any particular person to do.
Bears beware – if there could also be one issue which is extra sturdy than determining a bubble, it is determining when a bubble will burst.