🌽 Futures A Bad Thing For Bitcoin ? Well Every Coin ?
I will admit I had no idea really what futures where just that they where rolling out in December. All the talk lately is that this crash is due to futures contracts so I did some snooping around to find out what I could.
First off this youtube video is beast for explaining it lol
The general idea is to balance the market so you no longer have wild swings to the upside or downside you buy in for a value via a contract and when it matures or comes time to cash in you get that value for what you have.
However this still seems confusing to me as to why this would be crashing the market right now. From what I remember those futures where bought at $10,000 each which would make the price stabilize around the $10,000 mark right ?
On the other hand you have to wonder how many people are actually using the futures contracts how many bitcoin is really locked up ? Is it enough to swing the markets?
When I look at futures contracts for bitcoin it still floors me as to how it would make any sense to buy these and where any money really is made.
If someone has more insights on this please comment below thanks!
Futures are mainly for commodity producers to help then ensure that they can lock up prices to commit to their production committments. So, for bitcoin miners are producing BTC constantly and have plans to do so as long as it is profitable. A strategy for them is too sell futures contracts at $6,500 to ensure their profit in future months. That way they can deploy resources adequately to produce that bitcoin. Regarding buyers, that is part of the problem right now. There is no immediate need to buy the futures oher than speculate. If, lets say some one requires a payment to be made in Bitcoin then you could have a market like foreign exchange to buy futures to lock in the price as well. In other commodities markets, like corn or copper, there is always an expected demand so there are buyers. Unfortunately, until adoption occurs in BTC, futures do not have an important role on the buy side. However, that could change quickly if BTC ETFs are approved. If ETFs are approved, money coming into the fund would create demand to the spot price of bitcoin. At least, this is my view. Hope this helps!
Awesome thank you!! I guess that also might explain why we are seeing bitcoin mining go through the roof and become unprofitable now for most sites like hashflare and let alone trying to mine it yourself. Which starts to put us into a centralized mining position I would think.
I wrote a blog about this recently, you can find it here
https://steemit.com/bitcoin/@kabir88/the-future-of-bitcoin-and-bitcoin-futures-an-accountants-view
@kabir88
First time hearing anything about this. Color me confused. Quick Google Search gave me this
https://www.investopedia.com/terms/f/futures.asp
In case someone else is wondering.
To listen to the audio version of this article click on the play image.
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