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Will bitcoin futures crash the marketBitcoin vs. Bitcoin Futures: Which is the Smarter Investment? - Bitcoin Market Journal
Specialty shops stopped buying inventory, and then in turn became forced sellers as they closed up shop. Many large shops scaled back when a simple commodity to sell took on the need for specialization.
Collectors felt hopelessly surrounded by too many issues and overall appeal dropped. It remains, truly a picture of a player on a piece of cardboard. Today ICOs are abounding. Those with access to cheap electricity and computers such as in Venezuela have found a way to find something of value. Organized crime sees an easier way of transacting funds. CME will trade it, for a hefty transaction fee. Enter the speculators At the end of the day, just remember a currency's value is being convertible into more goods that something else.
True, convertibility is growing Another function of currency is to be a stable store of value. These are failing in that aspect. It's well publicized. I have uncles with 0 investing experience asking if I can buy them some. I don't know who is pumping this up Originally Posted by artillery Please register to post and access all features of our very popular forum.
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Will Bitcoin Futures crash Bitcoin? User Name. Remember Me. View detailed profile Advanced or search site with. Page 1 of 4. Advertisements Bitcoin futures trading begins tomorrow Dec 10th. Location: All Over 4, posts, read 5,, times Reputation: Location: Texas 5, posts, read 7,, times Reputation: Quote: Originally Posted by doodlemagic The futures market will not crash Bitcoin.
Location: Silicon Valley 5, posts, read 2,, times Reputation: Quote: Originally Posted by artillery77 When I was a child, we liked to collect baseball, football and basketball cards. It's cash settled. City-Data Forum Message. Cancel Changes. As discussed previously, digital currencies like bitcoin operate like a commodity from the perspective of investors. They mirror both the fundamentals and the volatility of assets like gold and other precious metals.
Therefore, traders should approach their positions like a commodities trader, not an investor. For example, take gold, one of the most stable commodities because of its diminishing role as a reserve asset. It still has volatility that has ranged from 4 to 40 percent per quarter since This degree of price fluctuation is virtually unheard of in the stock market but is trumped by other major assets such as soybeans 10 to 75 percent , crude oil This is a baked-in feature of the commodities market, due in part to relatively inelastic supply and pricing based primarily on market demand.
While this model works quite well in the steadier stock market, it would prove difficult on a commodities exchange. The price of coffee alone has fluctuated by more than percent in the past 10 years. In the past year, it has jumped by 12 percent before diving by 30 percent, before ticking back up by five.
Trying to resell a barrel of coffee beans as a traditional investor would be problematic. This uncertainty is inherent to bitcoin trading as well since the market is driven by a considerable level of speculation.
To deal with this, commodities traders rely on futures contracts. A futures contract allows the trader to invest specifically in volatility.
Instead of having to predict the right price at which to sell, a futures trader invests in price direction.
For instance, in buying bitcoin outright, a trader would have to choose a purchase price and then decide at what price to sell. Both of these involve precise decision-making and timing. This is tremendously difficult to pull off in the unpredictable bitcoin market. A futures contract would allow a trader to peg a future price point.
At the time of writing, bitcoin has a day volatility estimate of 3. In raw terms, the price of a single bitcoin has swung by thousands of dollars within the last year. This makes it hard to predict how and when, exactly, to sell your bitcoin. As with all commodities, the risk is always there. If you sell too soon, you may miss out on riches; sell too late and you may take a bloodbath.
A futures contract helps with that as it does not cap potential gains. Trades are made on direction and volatility, not price prediction. There are few, if any, easy ways to make money off falling prices when you hold an altcoin.
For this reason, markets like bitcoin tend toward speculation bubbles. Traders only have one option: buy low and hope to sell high, creating a speculation feedback loop which inflates the value of the altcoin.
For a highly volatile asset, this opens up far more opportunities to profit. The altcoin market crash in December might have been inevitable. However, if there had been short positions in place, perhaps losses could have been mitigated.
Short positions create an entire investor class built around breaking speculation feedback loops. This allows them to profit from downward price swings as well as bring an overly exuberant market back to its senses. In hedging, investors buy future positions against their current holdings. It is similar to taking out an insurance policy.