China’s bitcoin crackdown forces exchanges to close

CME will launch it on 18th December. Both are large derivatives exchanges in the world and CME for example is the oldest in the world. My prediction note of warning: In theory, futures trading launched on those platforms will allow institutional and retail investors to invest in Bitcoin which they could not do before i. This will now become substantially easier for investors who are already familiar with futures trading.

If I am wrong and the price is lower, then I will be paying more that it is worth and I will make a loss. When the contract is up, I buy Bitcoin at the market price, and deliver it to the contract holder in return for the promised amount.

There are also hybrid strategies such as holding the underlying asset and hedging: I hold Bitcoin and sell a futures contract at a higher pricer. If the price goes up, I make money on the underlying asset but lose on the futures contract. If it goes down it is reversed. Another strategy is buying and selling futures contracts to lock in price.

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All of this is very complex to us common people, but quite easy for futures and commodity traders who currently work in the futures market of gold. Since in most cases the commodity such as gold never needs to exchange physical goods, the futures market is often a multitude of the physical goods i.

Most futures work on a cash-basis and instead of delivering that Bitcoin to a wallet you will settle on cash instead. Why investors will like futures There is now nothing scary or limiting trading futures on Bitcoin. What is interesting with futures trading is that investors will get exposure to the mysterious trading of crypto-currency in an familiar environment where the Bitcoin as an asset will produce outstanding returns on a highly regulated and liquid exchange.

What makes this even better is that none of the investors need to own a single coin or a Bitcoin wallet address. There is also no limit on the number of coins, the number of trades, the dependency on the slow Bitcoin blockchain or the worry of a website being hacked NiceHash and coins being stolen, as there is nothing to steal. Futures trading does not require owning Bitcoin. So this means that no money will ever be invested into Bitcoin.

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