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RE: And just like that, the Derivatives Market is opening up to Bitcoin
I do not believe that this is good news for Bitcoin. This will open the door for money that was destined for bitcoin to flow into other investment vehicles, and just like in the gold and silver market they can create paper (derivatives) shares of bitcoin that will not be backed on a 1:1. This will mark the end of honest markets for Bitcoin. Just my 2 cents
The bitcoin market is honest today? With forks, ICOs, exchanges doing weird stuff...feels like it's the wild wild west.
By honest I meant that currently the Bitcoin market is complying with the laws of supply and demand. With derivatives markets players can satisfy the demand with unlimited supply of paper derivatives if they are not back by a 1:1 ratio.
Fair point. The wild west will get wilder!
My thoughts exactly. They'll take a cue from the COMEX precious metals markets and BTC price discovery will soon join the ranks of manipulated markets of specs vs. pros. we know who wins this war.
Derivatives are a bad move if we want to keep a legitimate exchange medium. It brings an ability for market manipulation, just like what is happening with the COMEX, as you mentioned. Seems main stream has found a way to gain some control over this cryptocurrency.
That is certainly possible. I think the counter argument to that would be if that money wasn't buying Bitcoin yet, why would they buy it in the future?
@tutial and @jrcornel I believe you are both right. While options open the market up to manipulation, those looking to manipulate will likely want to hold the underlying asset first in order to benefit/hedge their positions. At the least, the market is opening up to institutions who would otherwise not enter the space. Bullish, in my view, for the short/medium time-frame, and who knows on the long time-frame. Only time will tell!
Like any other "alt" investment vehicle, the underlying narrative is that a fiat rebalancing event would also reset the manipulation.
@maven360 I agree with you. This news are bullish for the price of Bitcoin in the short/medium time-frame. But, I do not believe that the introduction of derivatives is compatible with Bitcoins goals of decentralization. Derivatives will grant a central authority the means to satisfy demand with paper derivatives at unknown backing ratios.
@tutial True. Derivatives will place liquidity into the wrong places from a value perspective. However, distributed ledger tech has the potential to completely rewrite our current understanding of derivatives in the process.
So while CBOE/COMEX type derivatives will be self-serving, blockchain has the capability of offering futures on any time increment (1 millisecond - 100 years) with self-policing smart contracts that don't require a central authority. I won't pretend to know exactly how this will look, but the prospect is a positive one in my book!
Also, if market makers decide to over-manipulate a particular crypto, who is to say a different crypto will not emerge that does not allow futures trading? In effect, said crypto will likely become the new "decentralized" crypto that is immune to manipulation.
One approach to the coming flood of futures trading is to simply place "stink bids" in the market surrounding options expiration dates and let the max pain volatility be your best friend.
Still too early in the game to determine. Ball is now in the court of the SEC and figures like Jamie Dimon. We will see what the minions have to say!