How Futures Contracts Will Affect Bitcoin. Dec 06, · After hitting an all time high of 20, USD per bitcoin, the start of Bitcoin Futures trading saw a USD drop in the value of the cryptocurrency. While there are those who consider this to be a much needed course correction, many believe that the cause of this fluctuation is because of futures trading. Dec 15, · Technically, futures trading effect on bitcoin Singapore it is just another way of trading assets such as stocks, bonds, derivatives, and currencies. Published 2 days ago on November 4, By Omri Wallach. Best For New traders looking for a simple platform layout Native Chinese speakers seeking research and education tools in Chinese Mobile.
Futures market effect on bitcoinThe effect of the futures markets on Bitcoin prices | CoinCodex
Now, Bitcoin can be thought of as both — a commodity with store value, and a financial instrument, in that you can transact with it. But looking at the behaviour of prices of commodities like gold, silver and platinum would give us some idea as to how futures trading has affected commodities. Five years later, in , Gold hit an all time high of USD per ounce. Now obviously at the first glance, it looks like Futures trading affected the price of gold favourably.
However, according to a research by MasterTheCrypto, it is revealed that the inflection points for the growth of gold prices coincide with socio-political movements like the oil embargo or the Soviet Afghan invasion.
Silver futures have been trading on the CME long before gold; it dates back to At the time of launch silver futures traded for 0. A year later, its value remained unchanged. Again, the research conductor argues that growth coincides with socio-economic events like the end of the world war etc. This trend can be observed for other precious metal which are considered a good store of wealth, like platinum etc. World events affected its price more than the introduction of futures trading for the metal.
You get the point — if precious metals like Gold, Silver etc are anything to go by, the growth trend of bitcoin may not be affected at all because of futures trading. Bitcoin has a fundamental difference between all of these precious metals. The entire supply of gold, silver and platinum is not know.
Bitcoin on the other hand, has its supply capped at 21 million, of which 16 million is either owned or circulating in the market. So what we have here is unprecedented interest among investors for a very small amount of commodity. Many believe that this disproportionate demand and supply of Bitcoin in the futures market might just add to the volatility of its value.
Cleaner, cheaper, safer and more regulated. This would send disastrous signals to the market, and would be particularly scary during a bitcoin value descent. From the time that futures trading started, we have already seen a massive correction and a stabilisation of sorts that has followed. I suspect that the commodity market will consider bitcoin as an attractive store of wealth and going by past data, futures trading itself will not result in tremendous increase or decrease in Bitcoin value.
Its scarcity also adds uncertainty to the mix, as someone with relatively less amounts of bitcoin trading either way can really affect the market. One thing is clear. The regulations of cryptocurrency and the following embracement from regulated markets like the CME and the CBOE marks the end of the beginning of cryptocurrencies.
Will it take bitcoin to new heights or will it destroy it once in for all; it remains to be seen. Join our mailing list to receive Cryptocurrency investing and trading recommendations to your mailbox. In this Guide, we will cover Bitcoin options trading, options trading platforms and how to trade bitcoin options on deribit Bitcoin Futures A Bitcoin futures contract is essentially an agreement to buy or sell a set amount of BTC, for a fixed price within a specific period of time.
Price Manipulation Futures market traders seek to benefit from playing a game of arbitrage, and some Bitcoin analysts suggest that this may leave Bitcoin open for price manipulation. Increased Liquidity In the short term, the futures markets guarantee an influx of capital and in keeping with other futures markets we can expect an early period of price volatility as the futures are introduced.
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Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Related Articles. Financial Futures Trading How do futures contracts roll over? Partner Links. Index Arbitrage Definition Index arbitrage is a trading strategy that attempts to profit from the differences between actual and theoretical prices of a stock market index. Futures Contract Definition A futures contract is a standardized agreement to buy or sell the underlying commodity or other asset at a specific price at a future date.
Cash and Carry Transaction A cash and carry transaction is a type of futures market transaction in which the cash or spot price of a commodity is below the futures contract.