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Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

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Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#91

Post by pas »

pash wrote: post #24
gibybo wrote: post #6

Earlier quoted context omitted.

The markets are not as independent as they might seem. If the futures market gets ahead or behind of the other BTC markets, it creates opportunities for arbitragers to profit from the difference which has the effect of reducing the gap. It doesn't matter that they are cash-settled. For example, if lots of money start pouring into Bitcoin futures, the futures price will rise above the price on BTC exchanges. It will t…

More precisely, it is possible to replicate the final value of a futures contract (on Bitcoin or any other asset) up front, by trading in the spot market, even though a futures contract’s payoff is uncertain until it expires. Whatever the future’s value ends up being at its expiry, you can put together in advance a portfolio of holdings that will have the same value simply by borrowing a certain amount of cash and us…

> by borrowing a certain amount of cash and using it to buy in the spot market a corresponding amount of the asset on which the futures contract is written;

So if 1 BTC@januar17 is priced 10 000 USD, you borrow 16 000 USD and buy 1 BTC. How does that help you?

> if you do this, the value of your holdings in cash (after paying interest on your borrowings) and in the asset are guaranteed exactly to equal the value of the futures contract at expiry,

Why? If the spot price at expiry is different from 10 000, let's say it sunk to 5 000, then you have to give back cash and you have 1 BTC that is now worth 5 000.

Could you illustrate how the equivalence comes out?

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#92

Post by cesarb »

esarbe wrote: post #39
sametmax wrote: post #25

Earlier quoted context omitted.

That's pretty much what people use stock market for anyway. Most investors are no warren buffet, they bet at best on educated guesses.

You are talking about speculators. Anybody that holds an financial instrument for less than five years (my definition) is a speculator. Warren Buffet is an investor. He buys a business (he thinks) he understands and then holds on to it while it generates profit. It really bothers me that - in business terms - investors are nowadays just lumped together with speculators. Investors try to build something while speculat…

> Anybody that holds an financial instrument for less than five years (my definition) is a speculator.

So you think for instance that someone who puts all their income into a savings account, taking from it during the month to pay their expenses, is a speculator?

There are uses for short-term financial instruments other than speculation, for instance protecting the principal from inflation.

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#93

Post by bitxbit »

LrnByTeach wrote: post #40

I am trying to understand risks with arbitrage for professional traders with BTC spot (at Coinbase gdax) and CBOE Futures contract. Let us say, some professional trader "Short sell CBOE Future contract & Buy BTC Spot at Coinbase simultaneously" At the time of this writing, Futures contract short sell @ $18700 and BTC Spot buy @ $16700 simultaneously. http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures you wait…

Has a lot to do with trader preference. Stable exchange platform, 1256 contract tax treatment, the list goes on and on. A large scale arbitrage may not be feasible. In addition, market makers on the futures market are likely working off of a sizable inventory/pool of BTC. And they are likely pricing in a fat premium on top of anticipated buy orders. So they’re effectively acting as arbitrageurs. Bid-ask spread plus futures premium. 10-12% is rich but understandable.

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#94

Post by ringaroundthetx »

LrnByTeach wrote: post #40

I am trying to understand risks with arbitrage for professional traders with BTC spot (at Coinbase gdax) and CBOE Futures contract. Let us say, some professional trader "Short sell CBOE Future contract & Buy BTC Spot at Coinbase simultaneously" At the time of this writing, Futures contract short sell @ $18700 and BTC Spot buy @ $16700 simultaneously. http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures you wait…

Tax treatment of futures is AMAZING

The margin is free and its much greater (usually) than what you get in other markets

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#95

Post by prawn »

aninhumer wrote: post #76
jayd16 wrote: post #67

Earlier quoted context omitted.

So why does it take so long to make a transaction these days? Is the difficulty scaling outpacing the actual network?

As I understand it the transaction throughput is limited by the block size. The difficulty adjusts so the rate at which blocks can be mined remains roughly constant, but each block is size limited so it can only contain so many transactions.

Yes. Correct me if I'm wrong, but I think it's like a regular bus service to a desirable destination. 40 seats every few minutes. Highest fares at any given moment get a ride. But if there are hundreds of people wanting to go, those willing to pay peanuts get left waiting.

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#96

Post by spiorf »

mercer wrote: post #78
Kiro wrote: post #21

Earlier quoted context omitted.

> It achieves nothing that an increased blocksize would not have done on-chain Regardless of blocksize the block times are still 10 minutes which means you need one hour for the transaction to settle, per the 6 block standard. You can't compare that with LN.

Could you elaborate on that? I recall doing transactions that had 6+ confirmations in far less than 1 hour. Do I recall incorrectly?

That's just luck. The 10 minute is an average. There are times where you need three hours for 6 confirmations.

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#97

Post by spiorf »

JanSt wrote: post #8
sliverstorm wrote: post #5

Earlier quoted context omitted.

Just the next step from the Bitcoin economy, to the Bitcoin Standard economy, to the eventual Bitcoin Fiat economy. Seriously, the Lightning network looks a lot like the old Gold Standard, and the arc of Bitcoin seems to be reinventing modern currency, so I'm trying to figure out what's next.

To me, the Lightning network looks like a terrible idea. It achieves nothing that an increased blocksize would not have done on-chain yet wraps a faster-layer around the slower, deliberately crippled (1MB) blockchain and does require multi-hop liquidity that must be provided by interested parties. My understanding would be that the slower layer (like TCP) would be stacked on the faster layer (like IP). The lightning…

If you do that, in a year a new full node will take a year to fully sync. That means no new nodes. That means that over time bitcoin is dead.

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#99

Post by zAy0LfpBZLC8mAC »

pas wrote: post #91
pash wrote: post #24

Earlier quoted context omitted.

More precisely, it is possible to replicate the final value of a futures contract (on Bitcoin or any other asset) up front, by trading in the spot market, even though a futures contract’s payoff is uncertain until it expires. Whatever the future’s value ends up being at its expiry, you can put together in advance a portfolio of holdings that will have the same value simply by borrowing a certain amount of cash and us…

> by borrowing a certain amount of cash and using it to buy in the spot market a corresponding amount of the asset on which the futures contract is written; So if 1 BTC@januar17 is priced 10 000 USD, you borrow 16 000 USD and buy 1 BTC. How does that help you? > if you do this, the value of your holdings in cash (after paying interest on your borrowings) and in the asset are guaranteed exactly to equal the value of t…

> So if 1 BTC@januar17 is priced 10 000 USD, you borrow 16 000 USD and buy 1 BTC. How does that help you?

You don't offer 1 BTC@january 17th for 10,000 USD if 1 BTC spot costs 16,000 USD.

> Why? If the spot price at expiry is different from 10 000, let's say it sunk to 5 000, then you have to give back cash and you have 1 BTC that is now worth 5 000.

You don't have to give back any cash. You sell the BTC, that gets you 5,000 USD, you give the 5,000 USD to the owner of the futures contract (cash settlement of the value of 1 BTC), they pay you the agreed-upon 10,000 USD (in reality, those two payments are netted, so they pay you 5,000 USD, that's it), and you pay back your 10,000 USD loan.

Re: Bitcoin Futures Start with a Bang as Rally Trips Circuit Breaker

#100

Post by oneeyedpigeon »

idibidiart wrote: post #19

Is this just legalized gambling?

In a sense, almost everything you do with your money is 'gambling', spending it one way or another in the hope that the benefits of that decision outweigh the drawbacks (but without being 100% certain of that). Certainly, insurance, having a mortgage, and a pension scheme are also forms of 'legal gambling'.

(P.S. Gambling is legal for many of us)

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