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wry

Will the CME listing be good for bitcoin in the long term?

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With Bitcoin knocking on USD 10,000's door, there have been lots of stories on the price.  One of the things that I think has been driving the price has been the impending offering of a futures contract on the Chicago Mercantile Exchange (CME) that will facilitate trading in Bitcoin.  Up until this point, I've figured that this news was helpful for the price as people buy in front of this offering.  However I read the blog post referenced below and he seems to think it will be a big potential negative.  His point seems to be that once Bitcoin becomes a mainstream investment it will be treated as such.  Given that Bitcoin is relatively illiquid compared to other investments it will be the first to get liquidated in a crisis.  Anyway, he has lots of other points, including accusing us of being very unsophisticated, but I thought that sounded the most plausable way that the CME listing could be a long term bad thing for Bitcoin.

Has anyone else seen anything interesting about the impending CME listing?

Source:  https://www.marketwatch.com/story/bitcoin-rally-may-continue-but-is-it-driven-more-by-high-school-dropouts-than-fundamentals-2017-11-21

 

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At first my guess is it will boom the price but yes it will become mainstream and classic traders with no knowledge about crypto will get rid of as soon as trouble appear. Which could say that actual investors (with knowledge about how the crypto market work), will dump their coins too.

If too much of them do that it could be a hard time for BTC, but (still my guess) the money will float to another crypto. I believe BTC will correct at one point but others crypto will rise. So maybe (just maybe) it will be bad for the BTC but i believe it will be good for the rest of the crypto market.

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There is another article on this that talks more about the Wall Street types that use the futures markets:  https://www.coindesk.com/bitcoin-futures-make-way-new-kind-whale/

The angle basically seems that this is going to be bad.  Basically all people are doing in the futures markets are betting.  They don't need to buy bitcoin to long or short it, it's just a bet with margin requirements to minimize counter party risk.  This article reminded me of a lot of the whining I see on precious metal blogs about the physical price versus the financial price.

I realize most people on here, including me, don't have a lot of Bitcoin to begin with, so maybe a higher price isn't really that desirable anyway, but I'm enjoying trying to figure it out.

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I am so happy you started this discussion, as its a question I've been wanting to look into more also. I am not too familiar with how futures work, so I'm going to do some research then come back and give my point of view.

One thing that I do want to add before I reply further is that, everyone compares bitcoin to other bubble scenarios, but one thing (and potentially the most important thing) is that those bubbles didn't have a fixed supply, (tulip bubble popped because it had limited supply but then they grew more once conditions were right) and therefore the bubbles popped when the supply outgrew the demand.

The important thing to assess with bitcoin is that it doesn't follow that same condition. The only thing that can make this bubble pop is for the supply to outweigh the demand, which is incredibly difficult with a fixed supply asset. We would need some significant market manipulation to cause the kind of pop that affected those historic bubble events.

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23 hours ago, Dan said:

The important thing to assess with bitcoin is that it doesn't follow that same condition. The only thing that can make this bubble pop is for the supply to outweigh the demand, which is incredibly difficult with a fixed supply asset. We would need some significant market manipulation to cause the kind of pop that affected those historic bubble events.

I'm looking forward to your thoughts once you finish your research Dan!  For me the big "ah-ha" was that it's an all cash situation, futures investors never have to take delivery and it's functionally just like betting on a commodity price.  Gold Bugs have complained about this for decades. 

I agree that a lot of the current news coverage is a little too hyperbolic.  For me, that's a separate issue, and I think a lot of people are being a little too aggressive "talking their book."  In fact, I'm starting to view all the bubble analogies as a contrary indicator, if so many people think it is a bubble, clearly there are still a LOT of potential buyers out there, which we are presently seeing with this stunning price increase, almost 2K USD in one day!

Just one more thing about tulips, which seems to be the go to of the haters, the entire tulip market was about 5,000 people, todays Bitcoin market is much larger, and it truly spans the globe.  Bitcoin is a dramatic financial alternative to the existing fiat money system which has shown repeatedly to be rigged against most people.  Maybe things are not "different this time" (the most dangerous words in investing) I have no idea what BTC is worth, but I do know that it is radically different from what people have had for over the last 50 years.

Edited by wry

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1 hour ago, wry said:

I'm looking forward to your thoughts once you finish your research Dan!  For me the big "ah-ha" was that it's an all cash situation, futures investors never have to take delivery and it's functionally just like betting on a commodity price.  Gold Bugs have complained about this for decades. 

I agree that a lot of the current news coverage is a little too hyperbolic.  For me, that's a separate issue, and I think a lot of people are being a little too aggressive "talking their book."  In fact, I'm starting to view all the bubble analogies as a contrary indicator, if so many people think it is a bubble, clearly there are still a LOT of potential buyers out there, which we are presently seeing with this stunning price increase, almost 2K USD in one day!

Just one more thing about tulips, which seems to be the go to of the haters, the entire tulip market was about 5,000 people, todays Bitcoin market is much larger, and it truly spans the globe.  Bitcoin is a dramatic financial alternative to the existing fiat money system which has shown repeatedly to be rigged against most people.  Maybe things are not "different this time" (the most dangerous words in investing) I have no idea what BTC is worth, but I do know that it is radically different from what people have had for over the last 50 years.

It's hard for me to be able to evaluate the position the future market will have on the price of bitcoin.

In regards to bubbles however, one conclusion that I have come by is that when comparing to similar fiat scenarios, there was always a federal reserve printing out incredibly large amounts of money throughout the period (and history), which in essence, would have prevented such a thing happening (bitcoin's run right now.) Its with this basis that I believe that maybe this excessively high demand for bitcoin (although appearing to be  proportionate to bubbles in the past), might not actually be as insane as those cases, due to the higher dilution and increase in market supply of fiat being constantly printed by the federal reserve. In fact the bubbles of the past, could have been potentially significantly a lot worse that we realise, due to that fact.

It's really hard for me to find any valuable insight into the future market, but I think it's safe to assume it is going to effect the price of bitcoin, one way or another. This is in essence a learning experience for everyone as it will be the first time, and its just massive speculation to assume otherwise.

 

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