Is the CBOE leaving Bitcoin a good thing?

in bitcoin •  2 months ago 

The CBOE quietly announced they would no longer be making a bitcoin futures market.

That sounds like bad news at first, but is it really?

The thought was that these futures markets would add liquidity and bring in institutional money, but have they really?

Here we are over a year since they launched and the volumes have never really grown, at least with the CBOE product, and there hasn't been much new institutional money coming in.

Even the institutions that have come in, they likely haven't been participating in the spot markets at all, which really doesn't do bitcoin much good.

Since these products were cash settled, they really were just a bet on which direction bitcoin would go with very little actual impact on the underlying.

Done absolutely nothing for the price?

Not only have these products not helped prices go up, but the FED went so far as to say they are part of the reason the price of bitcoin keeps going down.

https://ambcrypto.com/federal-reserve-research-bitcoin-btc-futures-trade-dragged-down-prices/

The charts support that notion.

Ever since the CBOE bitcoin futures launched, the price has done nothing but go down.

Don't believe me, check this out:

(Source: https://twitter.com/AlexSaundersAU/status/1106515358934925312)

They are likely closing up shop for several reasons...

The CBOE futures products are significantly less popular than the CME, by orders of magnitude.

Check out the volume differences:

(Source: https://www.newsbtc.com/2019/03/15/why-bitcoin-market-may-be-better-without-cboe-futures-contracts/)

Also, it is possible that the CBOE is anticipating a physically backed product will be much more popular and they are working on launching one of those.

I mean, they have been a partner to some of the bitcoin ETF applications...

Not to mention we are on the eve of Bakt launching a bitcoin physically settled product.

The final possibility is an overall lack of interest from institutions, which can go hand in hand with some of the other points mentioned above.

Overall this won't affect prices much.

Anyone wanting to trade futures will likely just move over to the CME products, or they will move to the spot markets.

Stay informed my friends.

Image Source:

https://bitcoinist.com/cboe-bitcoin-etf-holy-grail-sec/

-Doc

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

Good riddance I say. The less of the toxic cash backed futures in cryptospace the better.

They only serve to allow non-crypto believers and haters to manipulate prices.

They completely remove the hard cap of bitcoin since there's literally no limit to the amount of cash that can be put to use in these futures contracts.

·

Yep, I completely agree with you about the supply issue.

I dont like the USD based Futures ... so yes! :D

·

I don't either. They are mostly just gambling products. Though I guess miners could use them to hedge their mining activities.

Very interesting 🧐

·

Seems like a bad thing on first glance, but perhaps it will be good overall?

We'll have our own futures with blackjack and hookers.

·

Different kind of futures...

Good analysis Doc.

Pretty pitiful volumes and I agree with you I think the futures market was over hyped creating a massive run up. cough insider trading cough

·

Correct. Can't say how exactly they helped push prices down, but that is what the FED paper claims happened...

They could be a good thing...if they legally had to buy a portion of bitcoin depending on the market. What number exactly...I'm not sure. Perhaps have the option to cover the "bets" with bitcoin, and then force them to hold enough to cover a certain percentage of the bets. I dunno...

I thought they might be a good thing...then I realized they were just bets...and yeah...they aren't that great. But they do give a little publicity. That's about all I can think they're good for. They may even add instability to the market, because those bets do effect the price. It's too new. I'm not sure anyone really knows. Just like crypto being too new for them to really know what to make of it. Futures based on crypto...FFS...

But, I think only giving it a year is not enough time...if they were worth keeping around at all. And I'm not sure they are, unless they are forced to keep a certain amount of the crypto they're betting on.

·

Yea these being cash settled were essentially just like betting on a price change without any effect on the underlying asset.

·
·

Isn't it kinda that way with other assets though? They don't buy corn when people bet on the price of corn, do they?

·
·
·

Correct, but one of bitcoin's selling points was the hard cap on supply. Cash settled derivatives dilute that premise.

·
·
·
·

Not really. They aren't the same. Sure, you get to hold a piece of paper...well...not even...a digital confirmation that you hold an asset linked to the price of bitcoin. But you can't do the same sort of things with it. It can't be stolen the same way...but you can't transfer it either. Bitcoin is same as cash pretty much, and even better in some ways. Sure, you can't spend it everywhere, and it does cost a bit to transfer it, but the places you can use it will increase. What can you do with futures? Just rely on the company that issues them to pay them back. What happens if there's a hack or major crash of the servers? Probably the same as bitcoin, you might just lose it. But at least with bitcoin you can back it up. With futures, you're reliant on them. It's like holding bitcoin on an exchange kind of. Maybe lower chance of getting it stolen. Though they could still hack their computers and steal their cash from the bank.

·
·
·
·
·

Yes, I am agreeing with you that they aren't the same, not even close. I am not a fan of cash settled futures in the least. They are ok as a hedging vehicle for miners but that is just about it.

#ByeFelecia We don't need them and never have.

·

Agreed. Though they were supposed to help bring in institutional money into the space, but that never really happened. Not much reason for a cash settled product.

I prefer them to be out but found it interesting as they were first to market and could hold up the leadership. I know they had been working on Ethereum futures as well as options for these futures. That may be held back which is probably negative from a market maturity perspective.

Posted using Partiko iOS

·

Yep I agree. Overall it doesn't seem like a good sign for institutional appetite, but hopefully they are just going elsewhere.

Finally that's going to be in a lot of ways for crytpo specially

·

We will see.

Just goes to show were not ready for mainstream. Not saying thats a bad thing just saying those outside of crypto dont really see the point in crypto.

Im most bummed because I think CBOE or CME have the best chance of an ETF. Now its up to the CME.

Posted using Partiko Android

·

I believe the CBOE will still try to get an ETF through through. The most likely reason has to do with demand. Not a lot of demand for their product so they close it down. If they money was there, they wouldn't be going anywhere... that is my guess anyways.