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Understanding the Consequences of an Ethereum (ETH) Futures Market in the US

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Last December, when we saw the Bitcoin futures market complex come into existence – first on the CBOE, and then on the CME a week later – it left a psychological scar in the crypto world that still resonates today.

Naturally, while financial theorists and academics continue to spin tales suggesting that Bitcoin futures actually hurt Bitcoin (and continue to do so today), the reality is this: by mid-December, excitement about Bitcoin had reached a fever pitch and the “bubble” was in full blossom (why do you think CBOE and CME were so eager to establish futures in the first place?). A market in that state is extremely fragile and any new catalyst can spark the needed deleveraging process. It’s a state of imbalance. And the universe abhors imbalance.

Moreover, it wasn’t the fact of Bitcoin futures coming into existence that caused Bitcoin to go down. It was the unsustainable parabolic rise in Bitcoin in the first place that caused Bitcoin futures to come into existence. However, as noted above, it left a scar.

This isn’t to suggest that Bitcoin can’t surpass its former highs. It surely can over time. However, a parabolic market mania is a parabolic market mania. It is unsustainable by definition. The advent of the futures market for Bitcoin was a well-timed crowning catalyst, much as we often see today when a group of stocks finally gets noticed enough to be crowned by a new ETF instrument. That invariably marks a top. Check out “FAN” for wind stocks, or “TAN” for solar stocks, or “MOO” for agriculture, or countless other examples. New financial instruments are often a symptom of a speculative imbalance rather than the cause of an inflection.

That takes us to the present day, and what, if anything, might result from the advent of Ethereum futures.

Ethereum Futures

First and foremost, markets are highly susceptible to post-traumatic stress disorder. In other words, the establishment of a “bogeyman” in the narrative of recent market history will impact how people position capital afterward, particularly when there are signs of the reappearance of that same bogeyman in the narrative.

In this case, the launch of an Ethereum futures contract in London in early May likely presented traders with a strong sense of “Oh no, here we go again!”, especially since Ethereum had rallied more than 100% in a single month into that launch, and subsequently started to decline immediately afterward.

However, while these fears may have a rational hook into the fabric of reality, there is another narrative that may deserve consideration.

The Big Point of Crypto Futures

At present, the principal use of the Bitcoin futures markets is for large-speculator hedging activity, according to CFTC reports. The data is incontrovertible at this point. The latest Commitment of Traders report for Bitcoin futures from the CFTC showed large specs carrying 1,945 contracts net short on CBOE and another 377 net short on CME.

In other words, big players (crypto hedge funds) are carrying large short positions in Bitcoin futures most likely as a hedge against regulatory hurdles to offset large bullish bets on speculative alt-coins.

This is the future of the cryptocurrency space: find the next coin that is going to ramp from $25M to $2B in market cap. These are lotto ticket bets. But in an inefficient market, that’s a reasonable strategy, especially if you can segment out and cancel the risk of broadly negative regulatory developments that hit the whole of the crypto landscape.

Where’s the Opportunity?

In itself, this is not a negative for Bitcoin. Those contracts held short are offset by small speculator long positions. But, more importantly, we are no longer in a crypto bubble. We are firmly deep into a crypto bear market that may be nearing its depths. Hence, the introduction of a new major futures contract that gives funds more access to hedging matter isn’t likely to have the same impact as it did in either of the prior two instances.

That’s where the interesting opportunity arises for Ethereum traders: the one thing you can probably bet on is that there is lots of money that “wants” to be in Ethereum, but is sitting on the sidelines because it doesn’t want to buy in front of the announcement that CBOE or CME is about to launch a contract.

In other words, it is hardly far-fetched to contemplate the idea that the Great Crypto Bear of 2018 might well be book-ended by the launch of major futures contracts in Chicago: Bitcoin Futures marking the birth of the bear, and Ethereum Futures marking the birth of the new bull.

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.

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Altcoins

Cryptocurrency Collateralized Debt Positions Are Growing in Popularity

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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.

What is a Cryptocurrency CDP?

In traditional terms, a CDP is essentially putting up collateral in order to receive a loan against the deposited amount.  There are several examples of this in our day to day lives.  Auto title loans from large companies like TitleMax are extremely popular with consumers.  Consumers are essentially able to use their car as collateral in exchange for a cash payment which can then be used for whatever needs the consumer has.  The consumer can continue using their car as long as debt payments are made.

The same concept applies to cryptocurrency CDPs.  Consumers are able to put up crypto tokens, such as…

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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.

As markets mature (and the crypto market is definitely maturing) it becomes more and more difficult to generate alpha.  In that regard, it’s similar to traditional financial markets.  I can remember trading during my high school days.  It was the late 90s and right in the middle of the dot.com boom.  Eventually, however, the euphoria fades away and reality hits hard.  Now, it’s become rather difficult to actually trade profitably which has given way to the rise of hedge funds.

Hedge funds are investment funds that pool capital from accredited and/or institutional investors and invest in a variety of assets, often with extremely complex portfolio-construction and risk management techniques.  The professionals employed by hedge funds are the best of the best and have spent years honing their craft.  That is why they’re able to make the millions of dollars that they normally…

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Altcoins

KaratGold Proves Its Business Model By Providing Official Documents

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There has been a lot of renewed enthusiasm in the cryptocurrency market thanks mainly to Bitcoin’s strong move about 10,000.  Although Bitcoin continues to show its dominance, the altcoin market has yet to benefit from that rally.  A few of the largest altcoins remain popular but the rest of the market continues to lag behind.  In 2018, there was a lot of talk regarding a possible altcoin apocalypse where only the strong would survive.  That prediction appears to be playing out as expected.  Going forward, only the best projects that have a real world need will survive.  Crypto traders will have to spend a lot of their time doing proper research in order to find the best opportunities, just like in all financial markets.  One promising project that appears to have the makings of a future winner is KaratGold Coin.

KaratGold Background

KaratGold Coin is a cryptocurrency developed by the reputable German company Karatbars International, which maintains a leading position in the market of small gold items and investments. The project is part of a larger ecosystem, which involves several blockchain solutions that can be used for transactions, communication, investing and other tasks. During the past few weeks, however, the KaratGold ecosystem has been a target of unsavory scam allegations.  

Karatbars International and GSB Gold Standard Banking Corporation…

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