In a recent post, @jrcornel asked "What do the introduction of Futures Products really mean for the price of Bitcoin?" The post ended with the following remark: "Let me know what you think ... Will it make prices continue to make new highs as new money continues to enter the space, or will it cause bitcoin to be shorted into the ground by the players who would love to see it killed?" The post is here.
The question he raises is an aspect of a related question about the various ways that futures trading is going to impact trading strategies and tactics of those dealing with BTC ("the underlying" as we say in the stock options sphere), as well as the time pattern of BTC spot prices. When I speak of "time pattern", I mean more than the price level issue (will it be up or down relative to current levels?). Consider the volatility pattern for example.
Here are some key references to help people get up to speed on what could be unfolding in the weeks ahead as both CBOE and CME open shop on bitcoin futures trading.
(1) There is a very long commentary on some of the ins and outs of cash settlements in bitcoin futures here. Make sure to see the second commentary, posted near 3:00PM today.
(2) Don't miss this tweet by Charlie Lee. It is followed by a long series of comments where the issue of opportunities to short BTC (via futures positions) is discussed substantially. As a futures Dummy, I found this very educational.
(3) "Bitcoin futures could lead to a Lehman-style collapse" says Shawn Langlois here . He lays out the scenario, and it seems far-fetched to me (remember I'm a Dummy); but something in that scenario rings a bell from my multitudinous stock market days. A big price crash triggers widespread brokers' margin calls, and traders with "shallow roots" are wiped out or face catastrophic losses.
(4) In its cash settlement process for futures trading of bitcoin, CBOE is said to have announced that it will be relying on spot prices in the Gemini Exchange. At this tweet, you will find commentary about the implications of placing Gemini in such a key position.
This subject (impacts of futures on cryptocurrency spot-price trading -- not only bitcoin but coins with correlated price patterns) is so important that I really want to stack all of this post below @jrcornel's article. That way we could all follow what will be a key discussion as one thread; but his was posted 4+ hours ago. It is now hard to find on Steemit, and almost no one (incl. the author) would pay any attention to my remarks if I chose to place them at the bottom of his post at this time.