Only in recent weeks, with the emergence of more and more new ideas about cryptocurrency futures in the media field, people have changed it. From advocating a large-scale crackdown on cryptocurrency, to providing more and more platforms for cryptocurrency derivatives, and then to the upcoming Ethereum futures ... These developments show that we need to re-examine cryptocurrency futures. These derivatives have been released for more than half a year, and the role of this asset class in cryptocurrency finance has begun to appear.
The origin of futures
Simply put, a futures contract is an agreement to buy and sell a certain number of products at a certain price at a certain time in the future. Futures is not only a tool to reduce the risk of commodity price fluctuation, but also a tradable derivative product.
The cryptocurrency community expects bitcoin futures to enter the regulated derivatives market for many reasons. For a long time, futures have been regarded as the first step to connect the cryptocurrency financial world with the traditional financial institution system. Futures contracts operate within a clear legal and operational framework to ensure legitimacy and security, which savvy Wall Street companies have been waiting for, so that they can finally catch up with the cryptocurrency craze.
Additional benefits include increasing the liquidity of the cryptocurrency market and the transparency of the reference price, in other words, making the cryptocurrency market more stable and legal. At the same time, cryptocurrency futures have brought hope to a large number of retail investors, who no longer need to trade cautiously on unregulated spot exchanges. For such traders, the biggest advantage of bitcoin futures may lie in its security: the cryptocurrency futures for cash delivery do not need to touch the cryptocurrency itself, eliminating people's concerns about hacking and stealing encrypted assets. However, the disadvantage of not holding real cryptocurrency is that in the case of bifurcated cryptocurrency, futures traders do not have the qualification of bifurcated currency for free.
With the Chicago Board Options Exchange (CBOE) launching bitcoin futures for cash delivery on June 5438+February 65438+February 0 last year, its competitor Chicago Mercantile Exchange (CME) also launched similar bitcoin futures six days later, and the prices of bitcoin derivatives and bitcoin itself soared in an unprecedented wave of publicity. The contract multiplier of CBOE is 1 bitcoin, while the contract multiplier of CME is 5 bitcoin. Both exchanges allow traders to buy futures contracts (long positions) and sell futures contracts (short positions), which means investors can bet on whether bitcoin prices will rise or fall.
Chicago Board Options Exchange (CBOE) made full use of their cooperation with Gemini, a cryptocurrency exchange operated by Winklevoss Brothers, and used their experience in tracking the price of cryptoassets to create Cboe Gemini Bitcoin Futures Index. The Chicago Mercantile Exchange Group cooperates with Crypto Facilities, a UK-based company, which has rich experience in cryptocurrency derivatives and has created its own price tracking tools-CF Bitcoin reference exchange rate of Shang Zhi Institute and CF Bitcoin real-time index of Shang Zhi Institute.
Compared with the spot, the futures price is in the agreed future time, and the buying and selling price is consistent with the previous futures contract.
Step into a bear market
Despite the hype of bitcoin futures, people soon found that the trading volume of bitcoin futures was not as much as some enthusiasts expected, which caused the first wave of bitter criticism. As a matter of fact, after the initial surge, the price of Bitcoin fell sharply in June this year at 5438+ 10, which did not help the growth of its derivatives market.
Marty Greenspan, a senior market analyst at social and multi-asset brokerage firm eToro, thinks this change is not surprising:
"Bitcoin futures have indeed opened the market for new investors, otherwise they will not be able to participate. However, it is not surprising that its trading volume has been quite moderate so far. The price of Bitcoin has been steadily declining this year. As long as its price is lower, there is no incentive to attract people to enter. "
Although it may be incorrect to attribute the low trading volume to the decline in the market value of related assets, some observers point out that the two are actually as cyclical as eggs and chickens, and they interact with each other. As early as June 5438+10, when a large number of explanations for the sharp drop in bitcoin prices began to appear in the media field, one of the less obvious but reasonable statements was that bitcoin futures trading opened the cryptocurrency market for investors who were bearish on cryptocurrencies.
The different strategies adopted by retail investors and institutional investors in futures trading can be used as indirect evidence of this statement. As revealed by a study conducted by the Wall Street Journal in June 5438+ 10, "novices" are more inclined to bet on the rise of bitcoin prices, while institutional participants tend to short bitcoin.
However, at that time, this concern seemed to disappear from the radar of the mainstream media. Until federal reserve bank of san francisco issued a document, it was "no coincidence" that the emergence of bitcoin futures and the decline of its currency price appeared again. Analysts at the Federal Reserve explained that the emergence of bitcoin futures gave "pessimists" a tool for the first time to counter the "optimists" who had been pushing up currency prices before. Another similar evidence is that Thomas Lee of Fundstrat attributed the decline in bitcoin prices to the expiration of Cboe futures in mid-June.
However, this problem seems to be far from being solved: those who accuse Bitcoin futures of lowering the price of money have also met with the same strong rebuttal from the other side.
"I have done some calculations recently, but I don't seem to have come to any conclusion," said Marty Greenspan, who believes that the size of the futures market is simply not enough to push the entire cryptocurrency ecosystem into a long-term bear market.
Rohit Kulkarni, managing director and research director of investment platform SharesPost, admitted that those "pessimistic speculators" had some influence, but he attributed the main reason to the regulatory turmoil in the first half of 20 18:
"Later [after 2065438+0712], the price of Bitcoin fell not because of the introduction of these futures, but because of the regulatory uncertainty surrounding the cryptocurrency market. In addition, we believe that irrational speculation by pessimistic investors has also caused price changes in the past six months. Therefore, we believe that the current cryptocurrency bear market is obviously to remove short-term speculators from the ecosystem, which is conducive to the long-term development of the cryptocurrency ecosystem. "
Further development
Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) are not the only entities that launch cryptocurrency futures, and bitcoin is not the only asset corresponding to these contracts. Since March this year, the explosive news of British financial institutions in this field has appeared continuously. In March of this year, Coinfloor, the British cryptocurrency exchange, announced the launch of the first physical settlement bitcoin futures product, which made headlines.
Also in March this year, it was reported that Crypto Facilities, a startup company, began to offer futures contracts related to Ripple's XRP tokens, ranging from 20 16 to 10, but for some reason, it did not carry out much publicity. In May this year 1 1, Crypto Facilities exploded another blockbuster in the field of cryptocurrency, revealing its latest ETH/USD futures products. Most importantly, in June this year, the company launched the first regulated Litecoin futures.
Due to regulatory obstacles, this kind of action is unlikely to be popular across the Atlantic. Some established companies in the United States seem to be eligible to join the cryptocurrency derivatives competition, but they have not yet made a decision.
However, this does not mean that American companies have stopped accelerating the launch of cryptocurrency derivatives transactions. At the beginning of May this year, The New York Times reported that both Goldman Sachs and new york Stock Exchange were accelerating their plans to launch cryptocurrency trading platforms and related products. A few weeks later, Susquehanna International Group, headquartered in Pennsylvania, incorporated bitcoin futures into its financial products.
In June this year, William Hinman, the chief financial officer of the US Securities and Exchange Commission (SEC), told regulators that "the supply and sale of Ethereum is not a securities transaction at present." This regulatory breakthrough may have a major impact on US cryptocurrency futures. This announcement has injected vitality into the industry. Chris Concannon, president of CBOE who knows cryptocurrencies, said that this cleared a key obstacle for Ethereum futures. If the Chicago Board Options Exchange (CBOE) opens the way to launch this product, considering the cooperative relationship between the Chicago Mercantile Exchange (CME) and Crypto Facilities, it is not difficult to imagine that the Chicago Stock Exchange will catch up quickly, because the ethereum derivative infrastructure led by Crypto Facilities is ready to be completed.
Obviously, despite all kinds of challenges, futures based on cryptocurrency have successfully promoted institutional capital to enter the cryptocurrency financial ecosystem to a great extent. Most experts have a positive attitude towards the further development of this trend and assume that encrypted assets will become a legal part of the financial system.
"As the anniversary of futures trading approaches, we expect more institutional investors to make big moves on cryptocurrency special funds. A recent example is the recently announced A 16Z, a $300 million cryptocurrency fund initiated by Andreessen Horowitz, which is dedicated to investing in cryptocurrencies and other blockchain-related projects, "Kulkarni pointed out.
Shane Brett, co-founder and CEO of GECKO Governance, a blockchain solution provider, seems to feel the same way:
"The emergence of cryptocurrency futures is a clear sign of the improvement of mainstream adoption rate, which helps to accelerate the maturity and legalization of the market."
For the "rookie" of retail investors, so far, the direct benefits brought by the launch of cryptocurrency futures may be much smaller.
"For mainstream investors on Wall Street, it is really bad to do Wall Street futures. They can also buy bitcoin directly. Similarly, the minimum contract multiplier of futures may also become an obstacle to entry. Shang Zhi's contract multiplier is 5 bitcoins, which exceeds the level that most retail investors are used to trading. Even the Chicago Board Options Exchange contract with a contract multiplier of 1 bitcoin is difficult for most people to get used to. " Marty Greenspan of eToro concluded.
As of press time, the price of Bitcoin is RMB 4 1870438+0.
Original:/news/bear-market-s-little-helpers-a-guide-to-crypto-futures
Author: kirill Brianov
Compile: linkea
Source (Translation): Babbitt Information (/Futures Guide) Copyright Notice:
The author reserves the right. The article is the author's independent opinion and does not represent Babbitt's position.