
Nasdaq Plans to Introduce Bitcoin Futures - knwang
https://www.bloomberg.com/news/articles/2017-11-29/nasdaq-is-said-to-plan-bitcoin-futures-joining-biggest-rivals
======
mads
Man, this is just weird. I just bought 0.05 Bitcoins (you know FOMO and all
that) and it just feels so much more empty than back in the days when I mined
them myself with my brand new dual Xeon CPU and later on was thinking grand
thoughts and building little projects with epaper ink displays to display QR
codes on small devices that would work on low bandwidth connections and maybe
offline. Lots of problems to be solved back then, but Bitcoin is just the same
now. Nothing was solved. No progress and scams everywhere and people being all
religious about Bitcoin. Every man for themselves and to the moon... These
days I am even getting scam calls from something called the Bitcoin Academy
with people cheering in the background, when it reaches the all time high. No
kidding...

I have no idea what to do with my 0.05 BTC. Just let them sit there, I guess
as a curiosity of old days. I don't really feel that I fit into the moon
community and I don't really feel I want to build anything around this tech
just because it is not about tech anymore.

Had lots of Bitcoin sift through my hands. Anyone remember the Bitcoin
faucets? Those were the times.

Sincerely, One of the first 1000 users of MtGox (proof in the leaked MtGox
database :P)

~~~
swalsh
I've always been a negative detractor of bitcoin. But then I realized the
problem was it was marketed wrong. As a currency, it's a nightmare of a
creation. But as a store of value, it's actually pretty good. As long as you
don't buy in at one of the speculative bubbles (which admittedly is when the
majority of people get in), it's been pretty good at more or less maintaining
its value.

As a non-physical thing, it's a good place to go when you're not sure about
where to put your money. That used to be the role of the dollar, but this is a
good alternative that has cheaper forex fees.

I think the long-term value of bitcoin will not be buying groceries, but
storing money while you wait for your the storm your grocery stores currency
is in to subside. Probably not relevant to Americans right now, but I'm sure
some people in Latin America can see the value.

~~~
vasilipupkin
Why can't people in Latin America just buy gold or dollars to store value ? I
mean it's a circular argument. To say bitcoin is a store of value, there has
to be an apriori reason why it has value. It can't be a store of value because
it is. Right ?

~~~
ericb
It is like if you and I took turns paying for lunch periodically and we used a
ledger to track who paid what, and who owes who. The ledger itself is bitcoin.
The ledger paper is worthless, but the entries on it "have value." For you and
I, the ledger "has value" because that's where the history is.

If you printed 50 new blank ledgers, they wouldn't have value because they
don't have the history and our mutual agreement.

Bitcoin is the worldwide ledger (WWL).

~~~
matt_wulfeck
Except it takes usually 2 to 3 days for the ink to dry in the ledger, and
costs you $3 every time you wrote in it, and consumed more electricity than
your house does in a week, and you do it this way because you want it to be
trustless.

~~~
lunchables
His analogy isn't perfect with all respect to bitcoin, but it is for that
explanation. And transaction fees doesn't really matter when it's used as long
term value storage for a significant amount of money. The small transaction
fee is basically irrelevant.

~~~
vasilipupkin
I don't get it. why is it a store of value? what makes it have value? For
example, suppose I just got paid and I buy bitcoin today. What is the force
that will make my bitcoins not be worth 0.5X over the next 20 years ?

------
chollida1
My guess is that this is probably pretty meaningless.

There are a few things going against them.

\- The CBOE and CME are both much larger futures exchanges and are going to be
offering futures first

\- since you can't net out futures contracts from different exchanges this
means they tend to become winner take all

> One way Nasdaq seeks to differentiate itself seems to be in the amount of
> data it uses for pricing the digital currency contracts. VanEck Associates
> Corp., which recently withdrew plans for a bitcoin exchange-traded fund,
> will supply the data used to price the contracts, pulling figures from more
> than 50 sources, according to the person.

This might be interesting as one of the things that everyone is worried about
is price manipulation.

If you haven't thought about how futures work with respect to margin and
marking at the end of the trading day you need to know that you can be
required to deposit more money into your margin account if the futures trade
moves against you on any given day.

This means the marking price is very important and lost of institutional money
is worried that the exchanges are easy to manipulate.

see: [http://openmarkets.cmegroup.com/3785/understanding-margin-
ch...](http://openmarkets.cmegroup.com/3785/understanding-margin-changes)

> Nasdaq’s product will reinvest proceeds from the spin-off back into the
> original bitcoin in a way meant to make the process more seamless for
> traders, the person said.

This is awesome,, right now the CBOE and CME both have punted on the question
of forks saying, they'll have a best efforts to figure it out.

~~~
Kiro
One difference is that NASDAQ is a name everyone in the world knows while CME
is fairly anonymous. Yes, I know they are bigger but I can assure you that if
you ask random people in my country most would know NASDAQ while very few
would know CME. Seeing NASDAQ is adding it will add to the hype.

~~~
hendzen
"CME is fairly anonymous".

What planet do you live on?

~~~
igorgue
>> "Yes, I know they are bigger but I can assure you that if you ask random
people in my country most would know NASDAQ while very few would know CME"

Just go out to a target and ask 5 people... Unless you live on mars already.

~~~
ashark
I imagine I'd get three "CME? Dunno WTF that is", "How about Chicago
Mercantile Exchange?", "Oh yeah, I recognize that from the boring parts of
morning news updates on the radio. They do something with soy beans, right?"
and two "yeah, still dunno. Is it a farmer's market?"

Midwestern US city (not Chicago).

~~~
Kiro
Outside of the US I don't think many would know what Chicago Mercantile
Exchange is though while most would probably know Nasdaq.

~~~
jonknee
But every single person who is qualified to trade futures would know about the
CME... It's the 900lb gorilla.

------
LeoJiWoo
[https://twitter.com/officialmcafee/status/935900326007328768](https://twitter.com/officialmcafee/status/935900326007328768)

Well John McAfee thinks bitcoin will hit 1 million by 2020.

~~~
lern_too_spel
Pump and dumpers gonna pump and dump. [https://medium.com/@DEFCON_2015/why-
mgt-was-delisted-from-ny...](https://medium.com/@DEFCON_2015/why-mgt-was-
delisted-from-nyse-amex-b919093f1e59)

~~~
KasianFranks
Or, large investment banking houses will step in and create naked shorting
opportunities to inflate sell pressure creating 'death spirals' to drive
prices down and scoop them up and extreme discounts. This happens in the
traditional public markets everyday.

~~~
westurner
> Or, large investment banking houses will step in and create naked shorting
> opportunities to inflate sell pressure creating 'death spirals' to drive
> prices down and scoop them up and extreme discounts. This happens in the
> traditional public markets everyday.

Is there a term for this?

~~~
KasianFranks
Yes, this can happen in a few different ways and is the reason why Ycombinator
created SAFEs. When you have a public company you will get offers for what are
called "credit lines", "debt financing" or "convertible notes". They are
traditionally used to create death spirals
[https://www.investopedia.com/ask/answers/06/deathspiralbond....](https://www.investopedia.com/ask/answers/06/deathspiralbond.asp)
as the size of your float increases by you, executive director (CEO/CFO), as a
public company "issuing" more stock to cover the loan. The more you issue, the
less you're worth until somebody comes along scoops you up and re-engineers
the cap table which is a restructuring. However, manipulation can occur within
institutions as well:
[https://news.ycombinator.com/threads?id=KasianFranks&next=14...](https://news.ycombinator.com/threads?id=KasianFranks&next=14592122)

------
bochoh
So here's a scheme that could be used to wildly profit in the fiat market. If
you're what is considered a bitcoin "whale" holding millions worth of the
currency you would just setup a short on bitcoin futures. Then you initiate a
large sell from a well known whale wallet. This would trigger a large sell as
stop losses are triggered. Profit then re-buy the dip.

~~~
lsseckman
Price wouldn’t drop unless you actually sold.

~~~
bochoh
The trick here is that the whale does sell but profits in Fiat. Then using
those profits you can buy the now cheaper Bitcoin. Wash, rinse, repeat.

~~~
superbrama
Depending on what market makers are up to, this will work or won’t. Trend
would be towards eventually not working if it does at all. Difficult to say
how liquidity differences will affect ability of your strat to work.

------
londons_explore
Can an expert explain for the less informed:

* Do futures markets typically stabilize the price of a commodity?

* Who loses out if a futures contract can't be fulfilled (for example due to lack of liquidity in the underlying market)?

~~~
koolba
> Do futures markets typically stabilize the price of a commodity?

Kind of. It doesn't necessarily stabilize the prices of the commodity so much
as allow the transferring of the risk associated with price movements.

> Who loses out if a futures contract can't be fulfilled (for example due to
> lack of liquidity in the underlying market)?

The exchange acting as the clearing house is on the other side of each
contract so they'd be left holding the empty bag. Exchanges deal with this by
settling futures daily (so net cash movement based on current price) and by
setting margin requirements on the members buying or selling contracts. The
margin requirements vary based on the volatility of the future and for
something like Bitcoin I wouldn't be surprised if was 100%.

What's particularly cool / safe (and interesting if you're a finance nut)
about futures vs. actual trading of Bitcoins is that there is zero crypto
involved. Everything is cash settled in dollars.

~~~
xbzbanna
Does this mean that tons of money could be invested in these - let's say a
trillion dollars going long on bitcoin via cash settled futures - and the
underlying price wouldn't necessarily go up at all? I always thought the play
with bitcoin was to wait until the "dumb money" got in via financial
institutions. But if the whales are just betting on the real price with cash
settled futures, does that mess up my assumptions about supply/demand?

~~~
maxerickson
The contracts would still involve real Bitcoin, the exchange would handle the
Bitcoin side for the trader.

~~~
xbzbanna
So I buy a future for 1 bitcoin in 10 days with a price of $10k. The future is
cash settled, so in 10 days the exchange will give me [price of BTC] - $10k,
or I can sell the future before then. Where does the bitcoin come in? Is the
exchange required to hold bitcoin = to the net of all futures?

~~~
QML
I’m guessing no fiat to crypto or vice versa; 1. That’s a taxable event. 2.
Wouldn’t that lead to more financial scrutiny?

------
slg
There was a 4 hour stretch this morning in which Bitcoin lost over 20% of its
value. In the last 45 minutes it is up 13%. I wonder what a long straddle
would cost on this thing.

~~~
g09980
Bitcoin has recovered from dips really well in the past weeks due to major buy
pressure. Unfortunately GDAX (and Coinbase), Gemini, and other exchanges all
went down at the same time this time around, making it impossible to buy the
dip.

~~~
ljk
> _Unfortunately GDAX (and Coinbase), Gemini, and other exchanges all went
> down at the same time this time around, making it impossible to buy the dip_

how like is being down planned? could there be more to this coicident?

~~~
josephagoss
Not sure about this incident, but I recall there was an incident earlier this
year or late last year where there was major price action and evidence of
someone DDOS'ing some exchanges.

And if not DDOS, it's entirely possible that these exchanges are not able to
handle the rush of people logging in to buy the dip. I don't think any of
these exchanges have the throughput of something like NASDAQ, not yet anyway.

------
richardw
Eek. Add leverage to BTC? Now fortunes can be made and lost on micro
movements.

Prefer buy and ignore for a decade. Still a trade rather than an investment
but at least you can only lose what you put in.

BTC moved 20% down in the last 24 hours. That's like a market crash in old
money. Leverage that and life will get exciting, fast.

------
colemannugent
> _... New York Stock Exchange owner Intercontinental Exchange Inc. is the
> only one of the four major U.S. exchange operators without public plans to
> offer bitcoin derivatives._

That's pretty big. A couple years ago people were very skeptical that the big
players would ever start dabbling in Bitcoin.

~~~
wpietri
In some sense, they're still not. Derivatives don't require much involvement
in the underlying commodity. For example, consider weather derivatives:

[https://en.wikipedia.org/wiki/Weather_derivative](https://en.wikipedia.org/wiki/Weather_derivative)

E.g., the CME's weather futures and options:

[http://www.cmegroup.com/trading/weather/](http://www.cmegroup.com/trading/weather/)

It's not like the Merc is really involved in weather. They just let people
gamble on the weather.

------
alex_duf
I thought BTC going above 10000 was the end of the bubble, but with announces
like that it's just the beginning.

Each time it grows I fear bigger damages... But I also hope I'm wrong and I'll
be just proven to be a fool for not having a bigger amount of bitcoin (I mined
some back in the days)

------
fragsworth
Hopefully it's not cash settled like the CME. That is the worst idea ever, and
will probably cause a lot of people to get screwed over by market
manipulation. Especially since the CME is basing the cash settlement price on
a single exchange: GDAX. Anyone can go to GDAX and crash or spike the price
for one minute at 4:00pm any day and trigger a bunch of margin calls on the
CME.

Especially considering how easy it is to make a bitcoin transaction (compared
to things like wheat, or oil...) it really should be "bitcoin settled".

~~~
vasilipupkin
I disagree completely. Cash settled futures let people bet on bitcoin without
ever touching bitcoin itself. For example, suppose I am a huge bitcoin hater
and want to bet that bitcoin will go down 100% in the next 3 months. Why force
me to worry about wallets, etc.? I just want to have a way to express my
conviction without messing with all that stuff.

~~~
minimax
Lots of people trade physically settled commodities futures contracts without
handling the underlying products. You just have to make sure you close or roll
your position before it settles.

~~~
vasilipupkin
Of course, but you could get stuck in a position. What's the point when cash
settling accomplishes the same thing ?

~~~
jnordwick
Physically settled allows the future to better match the price of the
underlying since you can take or give delivery in it.

~~~
vasilipupkin
That's not correct. They still have to pick a settlement price. Physically
settled futures makes sense when customers are interested in the commodity
itself and cash settled makes more sense for pure speculation.

~~~
jnordwick
There are many products that are settled both ways, and some financial futures
that are physically settled.

~~~
vasilipupkin
Sure. But physically settled funancial futures such as bond futures are
physical because customers actually want to get delivery of the underlying
bonds. In the case of bitcoin futures, most likely they don't. Physically
settled futures cost the exchange more in terms of additional expenses /
infrastructure. So the exchange will go with physical only when there is a
clear customer demand for that.

~~~
jnordwick
You're going off track. I'm just saying that phys settled allows the future to
track the underlying better because you can take delivery. This is a
completely seperate issue on if you actually want to hold the underlying (many
people would prob love the idea of using cme to deal in btc directly since
current exchanges are so terrible at it).

~~~
vasilipupkin
why does it track better just because you take delivery? either way, whether
you take delivery or not, the exchange has to decide on a settlement mark to
market price. So, delivery or not, it will track the same.

~~~
jnordwick
Because you can take delivery and sell on spot market either now or in the
future (with carry costs) or buy on the spot now, carry, and sell into the
future. This keeps the prices linked.

------
junkscience2017
inevitable that this will turn into another taxpayer bailout, somehow

~~~
phkahler
This makes me laugh and cry at the same time. Using tax dollars to bail out
the big guys who bought derivatives based on a virtual currency would be such
a cliche.

~~~
WJW
For all the complaining on HN about accredited investors, this is exacatly why
they were invented in the first place: because there was too much speculative
investment available to people who subsequently invested more than they could
afford to lose. The big guys have the power to get a bailout but the small
guys are the ones that starve to death because they can't.

~~~
phkahler
That's all backwards. The little guys are supposed to need the protection. The
big guys are said to be smart enough to know what they're doing and not need
protection.

------
argo_
If the bitcoin price was increasing linearly people would not be blaming the
technology so much. Rapid exponential growth followed by abrupt decline in
repeated cycles makes people confused.

------
chx
What is the difference between Bitcoin futures and gambling?

~~~
98Windows
It's still gambling in a sense however there is a major difference in the type
of randomness you are exposing yourself to. At a casino or when playing cards
it's very easy to compute probabilities of all possible events - hence the
house always wins. Here in order to compute the probabilities of price
movements you'd need to model millions of human agents across dozens of
markets. So unless someone has a lot of insider information, you have a decent
chance of making some money.

~~~
chx
Or lose a lot of it?

------
dailyvijeos
Tulip bulbs anyone?

~~~
anonymous5133
I'm taking it you are mad you didn't get in early, huh lol?

~~~
quickthrower2
I don't know about him but I'm mad.

Of course I'd have to have got in early and had the balls not the sell, not
lose the keys, not get hacked and not leave them on an exchange, for years.

~~~
cwkoss
I think one of the most important skills in trading is realizing the
impossibility of 'ideal' trades.

Perfectly buying at the bottom of a dip and selling at the top are both very
RISKY trades, particularly if trading with your whole stake: you don't have
much information to indicate that the market is changing and could have been
very wrong.

I think the healthiest perspective is just to compare investment vs. return
_in dollars_. If you're beating the broad market, you're doing fine and should
be happy. If you think about what you could have done with perfect hindsight,
you'll just make yourself miserable.

~~~
quickthrower2
The difference with bitcoin is the price increase from 1c / BTC to $10,000
means at many points someone could have purchased $1000 in BTC and been left
with enough to retire.

I don't think anything else has had that levels of "returns"

------
tonetheman
Seriously the top comment here should, WUT THE F __K!

Man we should instead of trading bitcoins trade fish in World of Warcraft.
Insane times we live in.

~~~
yclept
You may be interested to know the creator of the crypto currency exchange
Kraken was CEO of Lewt Inc. Many of the people involved in virtual item shop
businesses over the past few decades are prominent holders and founders of
crypto currency businesses and schemes.

------
chinathrow
I don't know why you should be able to speculate on a speculation product with
no real underlying other than a power conversion function.

~~~
gabesullice
Serious question: how do you feel about currency futures?

If you feel differently about them than you do Bitcoin futures? Why?

~~~
bluGill
currency is a real thing that is mostly used for real transaction. Most people
working in currency futures are working to offset risk - that is I shipped a
widget when it is delivered the buyer will pay a set price in their currency
which I have to convert back to mine. Bitcoin is used for transactions, but
most of the futures are based on speculation on future value and not something
fundamental.

