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How Bitcoin Futures Will Affect Price





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Bitcoin futures launch tomorrow (Dec. 10) on CBOE and on December 18th for CME Group. Many people speculate that the cause for Bitcoin’s run-up recently is over anticipation for these Bitcoin futures. In this video, I discuss the potential impact of futures on Bitcoin’s price.

First and foremost, I suspect liquidity will be lower than expected. The target group for Bitcoin futures are institutional investors and wealthy individuals, both of which tend to be more cautious. Given the warnings from FIA, Interactive Brokers and many others, these larger investors will likely be more reserved until the first expiration occurs and they have some experience watching the volatility in the futures themselves.

I did a brief explanation of cash-settled futures in the video, but I’d recommend you seek other sources to flesh out your understanding further. For example, I accidentally implied that the initial margin & mark-to-market process is done based off the spot price rather than the settlement price. The explanation I gave in the video is good enough for laymen, but if you want to trade these, then you’ll want to do some serious reading. I might do a video showing how to actually trade them in the future and get more technical.

The initial margin requirements are already high for Bitcoin and might increase depending on volatility. Certain brokers are already implementing higher than required initial margin requirements and are forbidding their clients from going short. Maintenance margin requirements will likely be in flux as well. Price limits might be tested more frequently than anticipated, leading to a choppy futures market which then screws with the underlying spot market. All of this is to say that many investors will wait before pumping significant amounts of capital into this nascent asset class.

Given this, I suspect this might be a “sell-the-news” type event and we might experience a correction following the CME Group futures launching if there are difficulties associated with their clearing. Note that CME Group has much higher contract volume than CBOE, so the CBOE futures launch will likely be more useful as an indicator of what to expect when CME launches.

I also forgot to note in the video that CME Group contracts are for 5 Bitcoin, which may have confused some of you when I said the initial margin requirements would be exceptionally high for CME Group options despite the fact they are going with lower initial margin requirements (35% vs. 44%) as a percentage of the contract value.

In the long-term, futures are excellent news for Bitcoin. They increase liquidity in a somewhat illiquid market, will decrease pricing inconsistencies (arbitrage), improve price discovery, and reduce volatility. The short-term will see volatility rise (likely) due to leverage, but this effect should reduce over the following months. Ideally, this opens the door for a Bitcoin ETF down the road as well. Eventually, more institutional investors will jump in as risk declines – but this will be a delayed effect (in my opinion) rather than an immediate one.

I would love to hear your thoughts. Let me know in the comments below and thank you for watching!

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26 Comments

  1. Please make sure you read the description – it is succinct and includes details I left out and some corrections. I'd love to hear your thoughts as always. As usual, make sure you check out and follow my Twitter as well: https://twitter.com/Truth_Investor

  2. You were spot on with how the futures would affect the price. I loved your videos when you covered crypto. Come back!

  3. You were spot on with your call about the sell off. I believe the same will happen with introduction of Bakkt futures. More realistic price discovery.

  4. Can you do an updated video covering your thoughts on bakkt futures? Physically settled in Bitcoin is a gamechanger.

  5. Crypto Investor, can i just ask a question about futures trading? If someone goes to a futures exchange can he than set up the Expiry Dates by himself? Or do the exchanges set the Expiry Dates themselves and therefore their customers cannot do nothing about it. Either engage in the future contract or not. Explanation please? Thank you.

  6. which means no one buys bitcoins anymore (cash settled) and bitcoin crashes, voila…

  7. I still don’t get why you would buy bitcoin you want a hedge from the dollar? Buy gold it’s proven it’s always been around and will continue to be around, bitcoin is the speculative asset that guys put money they don’t really have into

  8. the effect of bitcoin rate end 2018 2019

    study what happend to gold
    after list at future trading.

    stay hold
    buy more

  9. just ingone what the rate predict at their bet at bitcoin future contract.

    bitcoin future trading is not same consep witch crypto trading today.

    TradeStation Vs individu trader

    1. dont panic
    2, dont sell stay hold
    3 buy more

    only this way we all around the world will be WIN ( profit)

    if we all panic

    we a lose

  10. First i'm Jerry Mikel , I had like to say that anyone can have these kind of gains in Crypto Market. And no, i didn't mind any coins, and no, i wasn't an early adopter of bitcoin buying up coins when the price was under a dollar. I'm just a trader, who fairly opened up a few accounts and transferred $2000 into bitcoin then traded it up to over $50,000 a year back and i'm earning more profit compare to my past trade. There are so many great opportunities for anyone willing to pay attention to coin strategies, new coins, charts, and price action. You can find out what's the hottest new Coin and jump in early. Have you ever heard anyone say that trading is risky but profitable or might be dangerous,  But I have been trading cryptos stocks successfully for over five years, and I actually love trading them. I look forward to hitting the markets every day. its really not that difficult, You have to learn to read charts the way I do… I have taught quite a few friends to trade over the years. They often will sit in my office with me during the day and watch me trade, asking questions and learning from real live minute to minute executions. However, i feel good helping people to trade and manage their account because i think by doing this I'm gaining and impacting knowledge and maybe i will be entitle with a token percent for appreciation. I am a real full time trader because I love making my money from the markets, Lol. Feel free to reach me on jerrymikel555@gmail.com for trade and advice, Good luck.

  11. an example of a futures position is..

    Sell Short 5 January Bitcoin Futures "equivalent 25 bitcoin" (BTCF18) at 16.000 " CME Bitcoin futures track the CME CF Bitcoin reference rate"

    At 16000 $, each Bitcoin has a notional value of 80.000 $ ..The performance bond margin which is subject to change, will be approximately 47% of the notional value = 37.000$

  12. bitcoin future is not give positive impact to digital money market capital grow independantly.

    lean from gold rate history after inter the future market.

    Nasdaq market starting crash ??

    then digital money market crash too???

    get ready…

  13. <bitcoin address>
    ((1EX3QDvp5BzpfLJ2iCbYW4xKhvLfrRVKwr))
    If you see this article, you will be lucky for the next three years.
    You are the most precious person in the world.
    If you sponsor me, I'll be lucky for 3 years.
    For your honor

  14. One more problem is that Bcash is centralized. It was created and marketed by Roger Ver, the truth is that if Roger Ver dies, Bcash will go to nearly zero.

    If Vitalik dies, Ethereum will tank as well. Same for a lot of these teams. On the other hand, if a BITCOIN developer dies, BITCOIN continues all the same unscathed.

    BITCOIN is the most decentralized coin in that sense. And so I say GO….BITCOIN….GO . The KING of cryptocurrency.

  15. In other words…..Had we left your crypto world alone the sky's the limits for your profitability. BUT…we just HAD to let the gangsters in so….now your gains are capped and the earnings you WOULD HAVE had now belong to the Wall Street Monopoly!
    Am I close?

  16. I guess I don't see the point of buying a future, at least if you want to go long. If you think bitcoin will go up then buy a bitcoin why buy a future? I guess this gives you the option to essentially short a bitcoin but that's about it.

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