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How Futures Contracts Will Affect Bitcoin

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How Futures Contracts Will Affect Bitcoin
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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

Stepping off the rollercoaster: Why I’ve fallen out of love with Bitcoin

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Bitcoin
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The very word Bitcoin has almost become synonymous with that of cryptocurrency. It’s basically just a medium of conducting digital transactions – it’s a virtual currency and one of many. So how has it taken on a definition of its own and asserted itself as a leader in the digital financial ecosystem?

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Altcoins

Cryptocurrency Collateralized Debt Positions Are Growing in Popularity

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collateralized debt position
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While Bitcoin (BTC) continues to hover around the magical 10,000 price level, altcoins continue to fight an uphill battle.  Simply put, hopes of a future bull run continue to diminish as Bitcoin maintains its dominance.  One school of thought is that a few altcoins will survive and flourish, but which ones are anyone’s guess.  That being said, it’s hard to go wrong picking against the top coins like Ethereum (ETH), Ripple (XRP), Litecoin (LTC), and EOS.  These projects have managed to find a foothold in the market and have a better chance than most of staying there.  While traders wait for their positions to increase in value, one opportunity that may be worth looking at is initiating a collateralized debt position.

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Altcoins

Hodium Presents a Compelling Opportunity for Outsized Investment Returns

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Hodium
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I’m sure all of us remember the cryptocurrency glory days of 2017 and early 2018.  It was one of the biggest bull runs in history and created incredibly wealth for quite a few early entrants.  Unfortunately, for most of us, those gains have most likely been wiped out during the altcoin apocalypse.  The truth is that traders probably thought a bit too highly of their trading abilities when the reality was that anyone could have thrown a dart at a board and ended up making money.

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