Posts in Category ‘Bitcoin futures’

Bakkt: Bitcoin evolution Futures arrive in November

The price of Bitcoin and most of its colleagues from the alternative corner are still moving sideways. The market still smells more like bear than bull. This could change in November. According to Bakkt’s plans, it will then be possible to trade physically deposited Bitcoin futures.

Bitcoin evolution Futures? There already is!

As is well known, Bitcoin evolution futures are already an old hat – at least in crypto time. After all, CBOE made it possible to trade futures for the first time on 10 December last year – and thus tricked CME at the time. The Bitcoin evolution price, which was already on an upward trend, reacted to the CBOE announcement with an electrifying jump from around 11,500 US dollars (4.12.2017) to around 16,800 US dollars (5.12.2017). A few days later, when CME’s competitors threw their futures contracts onto the market, the exchange rate broke through the US$ 20,000 mark.

The Bakkt announcement on August 3, however, did not send such a signal. And this despite the fact that there is a decisive difference between Bakkt’s Bitcoin futures and the futures offered by CBOE or CME: Bakkt’s futures contracts should be “physically” backed.

Bitcoin evolution change owners

Bitcoin evolution Futures, also known as futures contracts, are generally agreements to buy or sell an object of trade at a certain (future) time and at a previously agreed price. It is not a Bitcoin evolution scam. You have the choice between two positions: the long position and the short position. In the case of the first position, the investor commits to buying the asset (the traded item) when the contract expires. Accordingly, the short position represents an obligation to sell the asset at the specified time.

Bitcoin futures are now futures contracts in which the underlying asset is the Bitcoin. However, this does not automatically mean that Bitcoin will change hands after a contract expires. Thus, the futures available so far are exclusively forward contracts with cash settlement, which bet on the price of the Bitcoin.

The situation is different with the Bitcoin futures from Bakkt: These are futures contracts, the fulfilment of which changes the asset (here: Bitcoin) or the ownership right to the owner. This means that the short position undertakes to sell the previously determined quantity of Bitcoin to the counterparty at the previously agreed price after the expiry of the contract and to transmit it “physically” (if Bitcoin can be considered as such). Should the Bitcoin price at this time be higher than the agreed price, the short position has made a loss. The deal for the long position was accordingly good.

The whole thing is to take place in a highly regulated environment. Bakkt thus wants to lower the inhibition threshold for institutional investors to enter the crypto market. In addition, the decision not to engage in margin trading is intended to ensure additional market integrity. Bakkt CEO Kelly Loeffler described the advantages of Bitcoin futures in a medium post on 20 August:

“In particular, the purchase and sale of Bitcoin is fully hedged or pre-financed with our solution. As a result, our new daily Bitcoin contract is not traded on margin, no leverage is used, and there is no possibility to claim a paper right to a tangible asset. This supports market integrity and distinguishes our efforts from existing futures and crypto exchanges, which enable margins, leverage and cash settlement. Combined with a secure, regulated warehouse solution, you can see how this market infrastructure can help more institutions and consumers participate in the asset class”.

The introduction of futures could awaken the price from its premature hibernation, but so far the price has been unimpressed. It is quite possible that the lessons of the past year will still resonate in the ears of investors.