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How Futures Contracts Will Affect Bitcoin

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How Futures Contracts Will Affect Bitcoin

Bitcoin impressive run to record highs of $16,000 will face its biggest test in the coming weeks as exchanges open their doors for Futures Derivatives. The crypto currency has been trading in an uptrend, but with the entry of Futures, investors will now be able to play ’both sides’ of the market.

Two Sided Market

A two-sided market is something that has not been put to test when it comes to bitcoin trading. CME Group and CBOE Global markets are set to change the landscape in the coming days in a move that could have significant impact on the crypto currency’s future

The opening of Bitcoin Futures will provide institutional investors and high-speed traders an opportunity to bet on the digital currency’s wild swings. News of the Futures derivatives sent the cryptocurrencies to record highs after registering a record single-day gain of $2,500.

Futures introduce a different type of playing the game. As it stands, the market has rewarded all investors regardless of the number of coins that one owns. However, with the introduction of bitcoin futures big name players are set to enter the game.

The new players have the potential to drive the market down given the amount of money they are set to inject into the market. Futures were designed with a sole purpose of hedging against the risk. They provide one of the surest ways of benefiting when things go bad.

Bitcoin Futures Impact

With Futures, contract miners will be able to get the price for the coins they intend to mine in future. Holders are already doing the same thing as they hedge their downside. As it, stands there is no hedger on the buying side, something that has consistently piled pressure on the downside. The equilibrium has always been met with a strong bull market thus preventing bitcoin from collapsing

The futures contract will make it easy for investors to play both sides of the cryptocurrency market unlike in the past. With the digital currency, trading at record highs on mere speculation there is now a strong reason to be a bear and make a considerable profit by hedging against it.

Bitcoin has experienced volatility never seen before if price gains of up to $2,500 in a day are anything to go by. With the entry of new money from institutional investors, volatility levels could get out of hand, to the disadvantage of a normal investor on the wrong side of a trade.

The volatile nature of bitcoin with the introduction of Futures derivatives could also present another risk for clearing houses which act as middlemen between parties involved in transactions. Wild price swings could make it impossible for smaller brokerage firms to meet their margin calls which would make them to fail.

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Image courtesy of Richie Diesterheft via Flickr

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Bitcoin

Bitcoin Price Dumps Below $41,000 Amid Uncertainty

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Bitcoin price dumped hard on Monday, briefly slipping below $41,000, erasing gains recorded in the previous week. The premier cryptocurrency seems to have exhausted its recent rally propelled by industry vulnerabilities. At the time of writing, the world’s largest cryptocurrency was trading slightly lower at $41,385. Bitcoin’s total market cap has dipped by 2% over the past day, while the total volume of BTC tokens traded over the same period climbed by 58%.

Fundamentals

Bitcoin price has been facing retracements and a rollercoaster over the past few days after recently rocketing to a 20-month peak. On-chain data has suggested that many investors used the opportunity to take some profits, leading to a decline in the asset’s price.

Bitcoin’s price slump is mirrored in the wider crypto market, with the global crypto market cap decreasing by 1.85% over the past 24 hours to $1.55 trillion. The total crypto market volume has increased by 32% over the same period. The Crypto Fear and Greed Index has plunged from a level of extreme greed to a greed level of 70, suggesting a decline in risk appetite.

Ethereum, the largest altcoin by market capitalization, is currently trading at $2,167, down almost 3% for the day. Meme coins have been hit hard by the market slump, with Dogecoin and Shiba Inu down by more than 4% over the last day.

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Bitcoin

Bitcoin Price is in Consolidation Mode Despite Market Optimism Post-Fed Decision

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Bitcoin price edged lower on Thursday despite optimism in wider markets on the back of the Fed’s interest rate decision. The flagship cryptocurrency has been consolidating above the critical level of $42,000 after briefly topping $44,000, its highest level in 20 months. Bitcoin was trading 0.71% lower at $42,569 at press time. BTC’s total market cap has increased by more than 3% over the last day to $832 billion, while the total volume of the asset traded over the same period jumped by 22%.

Economic Outlook

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The crypto market has been buoyed by the Fed’s latest interest rate decision. The US Federal Reserve on Wednesday held its key interest rate unchanged for the third consecutive time, in line with market expectations. With the easing of the inflation rate, members of the Federal Open Market Committee (FOMC) voted to keep the benchmark overnight borrowing rate in a targeted range between 5.25%-5.5%.

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Bitcoin Price Blasts $44K in Spectacular Surge as Spot Bitcoin ETF Approval Looms Large

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Bitcoin price has been hovering above the $43,000 psychological level over the past two days amid anticipation about the potential approval of a spot bitcoin ETF. The flagship cryptocurrency has climbed more than 16% in the past week and nearly 170% in the year to date. Bitcoin’s total market cap has increased by nearly 5% over the past 24 hours to $858.9 billion, while the total volume of the token traded rose by 43%. The Bitcoin price was trading at $43,914 at press time.

Fundamentals

Bitcoin price has posted significant gains over the past few days, climbing to its highest level since April 2022, before the crash of a stablecoin that started a litany of company failures, pummeling crypto prices. The world’s largest cryptocurrency briefly topped the crucial level of $44,000 on Wednesday amid rising momentum despite being massively overbought.

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