
Goldman Sachs Plans to Clear Bitcoin Futures When They Go Live - koolba
https://www.bloomberg.com/news/articles/2017-12-07/goldman-sachs-is-said-to-clear-bitcoin-futures-when-they-go-live
======
adrianratnapala
Has anyone discussed the future of forks with respect to futures? Or indeed to
any cryptocurrency denominated debts.

The easy case is: Alice owes Bob 1.0 BTC in year 2020. Between then and now,
BTC forks into BTC and BTZ -- and so now Alice Owes bob 1.0 "new" BTC and zero
BTZ. On net, does this mean that whatever fork retains the legal position of
BTC is going to be in more demand than hypthetical BTZs?

Given that, will it create a incentive for forkers to fight for legal
recognition such that debts can be / have to be payed in their own currency.
And if they do this with some success, what happens when instead of having a
clear BTC/BTZ split, you have a BTC_forkA and BTC_forkB for paying debts in.

~~~
jpmattia
> _Has anyone discussed the future of forks with respect to futures?_

The reference bitcoin index for futures is well-defined:
[http://www.cmegroup.com/trading/files/bitcoin-reference-
rate...](http://www.cmegroup.com/trading/files/bitcoin-reference-rate-
methodology.pdf)

I would guess that this was done in collaboration with the relevant exchanges.
So forks are pretty much a don't-care for the futures that begin trading in
the next two weeks.

~~~
tlrobinson
That doesn’t actually address the case where the constituent exchanges
disagree on which side of a contentious fork is “Bitcoin”.

Exchanges are incentivized to quickly converge on one or the other so it may
not be a problem.

------
bogomipz
>"The decision to clear client trades will be made on a case-by-case basis,
the person said."

Could someone say what "clearing the trades" mean here?

~~~
riazrizvi
It's where Goldman would net off trades between their own clients, effectively
acting as an exchange for their clients using the prices on the official
exchange. They say in the article they won't act as market-makers or hold
their own positions. That means they won't perform their usual capacity for
clients, where they act as middleman between the exchange and their own
clients. ie they won't make a price for their clients to buy a bitcoin future
the client wants to sell, and then turn around and sell the bitcoin to someone
else the exchange later in the day. They won't do that. What the will do is
buy the bitcoin future if they have another client that wants to buy it at the
same time, because then they will never assume much risk.

~~~
logicallee
So if the blockchain evolved such that it took 2 or 3 hours for a transaction
to clear, and cost, say, $5,000 then during the same 2-hour block Goldman
could let A sell 50,000,000 pretend bitcoins to B, B could sell 25,000,000
pretend bitcoins to C, and 25,000,000 pretend bitcoins to D, then the price
could move up (or down) and A could buy back 25,000,000 from C and 25,000,000
from D, so that A, B, C, and D have the same number of virtual bitcoins that
they started with - but the exchange could have resulted in a transfer of net
actual dollars between A, B, C, and D - without incurring up to 50 million *
$5,000 = $250 billion in transaction fees?

Where even though this net transfer happened, all of A, B, C, and D think that
it was fair and what they wanted? (I call them "pretend bitcoins" because they
don't need to be reflected in the blockchain - the transaction of 25 million
pretend bitcoins in motion aren't reflected in the blockchain.)

feel free to correct me if I'm very wrong.

~~~
rmah
Neither CME or CBOE bitcoin futures are directly connected to bitcoins. Both
will be cash settled (i.e. no bitcoin delivery). There will be no need for
buyers, sellers or intermediaries dealing in bitcoin futures to buy/sell/own
bitcoin.

------
curiousgal
I have been trading crypto for 5 years now and it is a wet dream for rogue
traders. There was a myriad of stories about traders and even banks that tried
to pull of some shady statretgy in the stocks markets that the SEC shut down,
those same strategies seem to be fair game in the crypto world, you just have
to have pockets that are deep enough. My point is that if you are smart and
think you can beat or even keep up with the crypto market, you will end up
losing because it’s been rigged for years.

~~~
coryl
If you are short term day trading you're likely to be a victim of pump and
dump groups and manipulation.

Going long on high market cap coins with a longer timeline is a relatively
safer bet.

~~~
curiousgal
There are fees to any position you hold so even though going long is indeed
the safe bet, having a longer timeline requires deep pockets.

~~~
bonestamp2
You can avoid the fees on some bitcoin exchanges if you're a market maker, and
with the volatility that's pretty easy most days. I made a couple 0% fee
trades today alone. But, the second part is definitely true... you still need
deep pockets to hold a long position.

------
bcg1
This should give the big Wall St banks the ability to muck with crypto prices
however they choose, just like they can do with gold and silver and other
commodities (for example, Goldman magically closed gold positions and sold
short 2 days before historic 25% price drop in 2 trading days in 2013[0])

Hopefully people will read those contracts and understand how delivery
actually works and realize that COMEX or whoever can halt delivery and settle
in cash if they want to, etc.

[0] - [https://www.cnbc.com/id/100630626](https://www.cnbc.com/id/100630626)

~~~
vkou
> This should give the big Wall St banks the ability to muck with crypto
> prices however they choose,

The current status quo is that large bitcoin holders can muck with crypto
prices however they choose.

~~~
partiallypro
Futures exchanges will have to buy large sums of underlying assets (one reason
for the recent spike.) So, in the end a lot of exchanges will be some of the
largest crypto holders.

~~~
rmah
The currently proposed CME and CBOE futures are cash settled. No actual
bitcoin is involved. Neither the buyers or sellers of the futures, nor any
other entities involved, will need to buy/sell/hold any bitcoin.

------
coryl
I suspect the investment banks that say they're going to stay away will
quickly get FOMO and jump in sooner rather than later.

Crypto is always in the headlines and will constantly occupy the headspace of
trader's colleagues and peers, so it's just human nature that they will not be
able to resist having a taste.

------
Havoc
Key part being that they'll let client's play that game. I don't see any
enthusiasm from them to put their own money into futures layered on top of
what looks decidedly bubbly.

~~~
topmonk
Because the best way to trade is to announce your intentions 2 weeks before
you execute...

------
gleenn
I have no idea if Bitcoin is going to succeed or fail, but if anyone thinks
the second guy in the video has no idea what the block chain is because he
mumbled "block-coin", you have been fooled. Who the hell is that "reporter"?
When would the CEO come out and boast this is all a joke. Of course Goldman
has an very keen understanding of what's going on. They are almost guaranteed
to have a position on BTC one way or another and be goading people into buying
it. That doesn't mean smart or lucky people won't be able to ride their wave
up if they are successful, but to think Goldman is dumb as those two guys seem
is completely ludicrous, its obviously an act.

------
osrec
I wonder what Jamie Dimon thinks about this! Funnily enough, my sources tell
me JP will be in on the futures contracts as well. What hypocrisy!

~~~
workthrowaway27
It's not really hypocrisy. There's money to made by clearing futures and some
of the banks want that money. What's being traded doesn't really matter.

~~~
osrec
Maybe, but then the things he said about his potential future clients are just
downright hurtful: [https://www.cnbc.com/2017/10/13/jamie-dimon-says-people-
who-...](https://www.cnbc.com/2017/10/13/jamie-dimon-says-people-who-buy-
bitcoin-are-stupid.html)

~~~
kough
> "The only value of bitcoin is what the other guy'll pay for it," Dimon said.
> "Honestly I think there's a good chance of the buyers out there are out
> there jazzing it up every day so that maybe you'll buy it too, and take them
> out."

Is there any reason to consider this statement inaccurate?

~~~
osrec
It's accurate, but it's also accurate for almost every fund/structured
security that many of JP's desks are peddling.

------
mrgordon
I bet Ethereum futures come within a year or so. Now that the banks are
executing trades for one, it’s much easier to add more.

------
joyes
[https://www.aprexcoin.org/](https://www.aprexcoin.org/)

------
tCfD
bitcoiners in 2012: "Bitcoin will eliminate the wall street banksters!"
Bitcoiners right now: "OMG Goldman is getting in, who's ready for their moon
rocket?"

~~~
mirimir
Expectations are rather more mixed than that.[0] Sure, the price could spike
even higher after futures go on sale. But volatility will increase
dramatically. And you can't count on exchanges, if the price collapses.

0) [https://www.coindesk.com/bitcoin-futures-make-way-new-
kind-w...](https://www.coindesk.com/bitcoin-futures-make-way-new-kind-whale/)

~~~
CryptoPunk
Futures markets reduce volatility.

~~~
lbotos
Can you do an "Explain it like I'm 5" of this? I don't doubt you but I'm
struggling to make the connection. Will futures affect the pricing of the
underlying asset? (I don't think so?)

I think you are saying "futures reduce volatility for the trader" but I'm not
sure.

~~~
cm2187
It allows participants to short and therefore should allow more balanced
flows.

However one needs some pretty steel-made cojones to short a bubble....

~~~
jjxw
More specifically, it allows one to short with limited downside. There are
some exchanges that provide naked short positions in Bitcoin, but those have
theoretic infinite downside and your broker will force you to liquidate at a
loss at a certain point.

With futures, however, you can put together positions that will provide a
known limit on your downside for short positions. This provides a more
appealing avenue for shorts to get in with much less risk.

~~~
cm2187
I am not sure I get how the risk is limited with a future. If the price goes
to $1m when you traded at $16,000, you will have to make a $984,000 margin
call payment (+margin).

------
jerkstate
wow, these guys seem even shiftier than usual, trying to deflect whether or
not they have a bitcoin strategy..

~~~
ucaetano
Oh, they have a bitcoin strategy: making money out of the fools trading it.

------
teilo
> In fact, the Bloomberg system is a blockchain, just instead of having the
> users control it, we control it, but it has all the attributes of that.

Thus proving that whatever he thinks about Bitcoin, Michael Bloomberg is
clueless about the blockchain.

~~~
Florin_Andrei
Why can't they run an internal blockchain?

~~~
firethief
Why can't a fish wear swimfins?

A blockchain is a solution to the problem of establishing consensus without
relying on an authority. If your systems relies on trust in an authority,
adding a blockchain is good for one thing: marketing.

~~~
dragonwriter
You just provided a reason to use a block chain, not a reason that it is
implausible.

Whether or not it is something you think of as a good reason, “marketing” is a
real reason things get done in businesses.

------
baldgeek
The bigger it grows the harder it will fall. The design/implementation of
bitcoin as a currency is severely flawed.

Projects like Ethereum, Hyperledger, and IOTA have a more long term focus.
Full Disclosure: I have no positions in any crypto but have been reading a
lot. Also, in the midst of two courses that go that cover crytpocurrencies and
blockchain tech.

1\.
[https://www.coursera.org/learn/cryptocurrency](https://www.coursera.org/learn/cryptocurrency)
2\. [https://www.edx.org/course/blockchain-business-
introduction-...](https://www.edx.org/course/blockchain-business-introduction-
linuxfoundationx-lfs171x)

#1 gives a very good history of what a blockchain is, and how is implemented
by bitcoin. This is enough to keep me away since I have learned about all the
technical flaws:

#2 discusses blockchains, and consensus algorithms. This project shows lots of
promise. They just added code that allows the consensus algorithm to actually
be changed via a transaction, without a hard fork.

Bitcoin gets all the credit for introducing the world to the blockchain
concept, but its far from a sound solution as a cryptocurrency.

~~~
sp821543
You should take a look at IOTA's github repo.

------
Frogolocalypse
> “Given that this is a new product, as expected we are evaluating the
> specifications and risk attributes for the bitcoin futures contracts as part
> of our standard due diligence process,”

How can you be diligent at identifying risks in bitcoin derivatives? O_o

