This Is Where The CME Would Halt The Bitcoin Plunge

Tyler Durden's picture

If Bitcoin futures were trading, they would have just triggered the first circuit-breaker at a 7% plunge threshold...

Of course that would have just halted trading for two minutes on the futures exchange - not the underlying bitcoin exchanges.

As we detailed previously, having taken a gamble on bitcoin futures, which are set to begin trading by the end of the year, the CME is now seeking to avoid the consequences of what has emerged as both the cryptocurrency's best and worst selling point: its unprecedented volatility. To do that, the Chicago-based exchange will do what it does to virtually every other asset class traded under its roof, and impose limits on how much prices of bitcoin futures can fluctuate within a day.

While the CME already uses daily vol limits on most other markets, including crude, gold and market futures, to temporarily halt trading when price swings get out of control, the CME has never before dealt with something like bitcoin, which in addition to being the world's best performing asset classes in recent years, is also its most volatile. And, as the WSJ adds, it is also unclear how much impact CME’s limits will have on bitcoin, since its futures market has yet to emerge and most trading in the digital currency is on exchanges outside of CME’s control.

In any case, based on the CME's preliminary term sheet, bitcoin trading limits would kick in when the price of its bitcoin futures move 7%, 13% or 20% up or down from the previous day’s closing price. The first two thresholds, for 7% and 13% moves, are “soft” limits, which would trigger a two-minute pause in trading of bitcoin futures. The 20% limit would be a “hard” stop on how far CME’s bitcoin futures could swing on any day.

By comparison, the CME has similar staggered volatility control on its popular E-mini S&P 500 futures contract, which also has three successive price-fluctuation limits at 7%, 13% and 20% during regular trading hours. A nighttime limit of 5% was hit in the S&P 500 futures on Nov. 8, 2016, when news of Donald Trump’s upset win in the U.S. presidential election triggered wild volatility in stock-market futures, only for the S&P to surge 21% in the 12 months since.

Of course, bitcoin will be a far "wilder" and more volatile instrument than the S&P 500 (one hopes). According to Coindesk calculations, so far in 2017 there have been two days in which bitcoin’s price swung more than 20% in a single day. There were 11 days in which it moved at least 13%, and 69 in which it moved at least 7%.

The full bitcoin contract specsheet is below.

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For now Bitcoin is down 18% from its record high - closing in on a bear market...

 

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cheka's picture

the 51 percent threshold spells doom.  i hear one group is at 50 - and climbing

https://learncryptography.com/cryptocurrency/51-attack

abyssinian's picture

why halt plung? need to buy it cheaper.. stop the maniuplation... 

DrumpFired's picture

This article is ridiculous.

nope-1004's picture

Glad the corrupt CME has the investors' back.  Especially those advocating an alternative currency to the US dollar.

/s

 

tmosley's picture

Those who hodled, or even better, bought more BCH are doing very well today.

Consensus seems to be split in the bitcoin community over which chain is the best. I say hold at least some of all. No need for maximalization.

BaBaBouy's picture

"This Is Where The CME Would Halt The Bitcoin Plunge" LOL ...

Paper Bitcoinz . . . It's Fucked Now like all other "Paper Futurized" Assets ~

Resistance is futile, you will be A$$imilated <<<

DjangoCat's picture

"This Is Where The CME Would Halt The Bitcoin Plunge" LOL ...

This is where the futures betting market would be stopped, but the Bitcoin price would continue its move.  Nothing would be stopped at all.  Fake news.

rccalhoun's picture

yes, BTG

when/if they get it launched.  ASIC has a finite lifespan....GPU or some other form of mining.

Aftoward's picture

ASIC's have a future in Litecoin. At least for now.

IH8OBAMA's picture

The Bitcon traders aren't very sophisticated.  They like to trade at round numbers.  Since 7,000 broke look for 6,000 to be the next support.  If that breaks, it's going to be a while before it recovers - if ever.

 

tmosley's picture

You peanutz sure are stupid.

Last time BTC fell $2000, it came right back and went to new highs. ET killed himself from the shame.

Golden Phoenix's picture

The CME has no authority to stop the trading of independent crypto markets whatsoever. CME bitcoin futures will not incorporate actual delivery. They will represent pure derivative directional bets just as one would bet on one sports team or the other. That said there's nothing illegal about owning a future contract then spreading fake news FUD about the underlying market. 

BeanusCountus's picture

Just wondering if the futures contracts will trade without actual delivery similar to precious metals.  If that is the case, which I expect, creation of the futures exchange is more a reason to stay away from bitcoin than buy it.

Aftoward's picture

Presuming they actually establish a viable Mainnet, it becomes mineable using Equihash on Sunday. It potentially could be huge as there will be no need for ASIC's to mine it. I know a number of GPU miners, including me, who are watching this very closely. BTG futures are up to $180 as I write this.

Golden Phoenix's picture

BTG futures are still trading below the price of the 2X futures which means they are trading lower than 'not going to happen'. Additionally some in the crypto community are very resistant to premined coins. Not to say a lot of people wouldn't have fun mining it even if it performs only modestly.

Golden Phoenix's picture

They'll be needing it to hit at least $1800 just to match the past performance of the guys who sold at the August highs then doubled the proceeds in BTC. If it doesn't then it's back to hodling and hoping. Suggestion: Watch Monday and Tuesday before you decide if BCH is the real thing or a fork pump and dump. 

toknormal's picture

The real "Bitcoin Cash" in practical terms is actually Dash. It has the advantage of not prentending to be bitcoin and not-bitcoin at the same time.

Golden Phoenix's picture

The proceeds from a 51% attack on bitcoin would be miniscule compared to the resources required to pull it off. It could only be attempted one time. If it succeeded then the expensive equipment designed for mining bitcoin would be rendered useless in the process. Anyone attempting it would be working against their own best interests because they'd financially wreck themselves for little gain. If supporters of a competing coin attempted this and it were proven their own coin would be wrecked.

Tone Vays made an interesting comment. He said he pointed out to some people if they caused one bad dark web person to lose millions something very bad could potentially happen to them. Those same people subsequently reversed their 2X position.

Point being free markets and communities such as the crypto community are fully capable of policing themselves in a surprising variety of ways with no need for governmental intervention.

 

Drachma's picture

I thought the whole crypto community polices the distributed ledger by consensus (i.e. >50% of supernodes agree on the chronology of transactions). This is touted as one of the blockchain's strengths, because supposedly no one entity can outpace the computing power of the rest of the newtork. What's to stop a 51%er from validating their own transactions onto the blockchain and double-spending until their heart's content? Wouldn't those be accepted by definition? How would waiting a few blocks for confirmation help anyone if the transaction is initiated by the entity creating the consensus? How is it that the crypto community would know where this 'consesus' is coming from exactly? Please explain. Just trying to learn. Cheers.

btClunker's picture

I understand it this way. Miners have a very strong incentive to stay bellow the 51% threshold.  Money.  Once you break it, no one is going to want to play anymore, value back down to where it came from. 

Drachma's picture

Thanks for the feedback, but I don't think you understood my question. How exactly would you know its broken? Cheers.

agstacks's picture

Bear market, lol.  

FreeShitter's picture

Just trigger my buy orders already, come on bitchez dont fail me now.

tropicthunder's picture

I bet the margin requirements will prohibit most small speculators from trading this shit..

I wonder how many "commercial" users actually need BTC hedges.

Seems more like a mechanism for TPTB to smash, crash, hammer and pound BTCUSD prices..

DjangoCat's picture

How does smashing down the price of a fiat bet affect the price of Bitcoin?  It is the other way around.  If they short it they will lose, plain and simple.  If they go long, who will be on the short end?

Of course in the current move, the shorts would win big time, if there were any.  Were they ready?  I think not.

 

tropicthunder's picture

Just look at gold and silver futures. Do they actually have the metal to back up the paper? Of course not..

Mister Ponzi's picture

> I wonder how many "commercial" users actually need BTC hedges.

The lack of a hedge is the main reason many merchants haven't accepted Bitcoin as a payment method so far. A friend of mine who is a precious metals dealer told me he would like to accept BTC but fears its extreme volatility may lower his margins. If you are a merchant with high revenues the lack of a hedge can cost you a lot. So, we will see whether the introduction of BTC futures at the CME will make merchants adopt BTC for payment.

btClunker's picture

Why not just use Bitpay and you can decide to take payment in local currency or keep it in BTC. Or maybe just a percentage. No hedge needed. 

dark pools of soros's picture

how many gold coins for a bitcoin? 3 or 6 give or take a few shekles??

semperfi's picture

if YOU had 6 gold coins, would YOU trade it for 1 bitcoin ?

affirmed_78's picture

If bitcoin was trading for more than 6 x the current price of gold... uh, yeah.

AGuy's picture

"if YOU had 6 gold coins, would YOU trade it for 1 bitcoin ?"

I won't trade one gold coin for 100 BTC. In the long term, BTC is headed to to zero. But I doubt it will go to zero anytime soon. It will likely be a slow and painful slide down over years, once the euphoria with BTC and cryptos are over.

btClunker's picture

So your saying you wouldn't give one gold coin to receive  over 480 in return? Sounds like you must love being right more than wanting gold, in the long term of course. 

oddjob's picture

Is this paper Bitcoin?

DjangoCat's picture

No, it is a fiat betting market on the price of Bitcoin.  Price moves in Bitcoin will break their balls.

Greenspazm's picture

Any investor queries arising from these new developments can be directed to the Office of Ms. Satoshi Nakamoto, email: bull@shit.com or truly@fuk.yall

We will attempt to address your questions within 20 working days.

 

 

khnum's picture

There are only two known tech gurus on earth capable of writing the bitcoin program one works for Hanson robotics and the other is not a mythical Japanese anime character its AI itself 

Greenspazm's picture

Well, whoever or whatever the initiators might have been, the scammers and pump-and dump artists are truly in control now.

khnum's picture

It takes about half a mil to start a decent bitcoin mining operation so yeah the conventional crooks now have an interest

ReturnOfDaMac's picture

"most trading in the digital currency is on exchanges outside of CME’s control"  ---- what a crock of horsepuckey.  Doesn't stop them from doing it with gold.  Gold shops and miners are outside CME's "control" and yet they can still cap the price.  It will work man, c'mon exchanges pull it! 

Now how do I short the exchanges when this thing blows up in their faces ...

DrumpFired's picture

Gold is not digital currency. There is some barriers to cross over before being able to control Bitcoin.

ReturnOfDaMac's picture

That is the beauty of these fake, western, so-called "exchanges".  You never have to either own nor deliver the actual commodity.  Trades mostly settled in paper.  Take the precious for example, most of the real metal is traded in China.  But the price is set in the west.  All that really gets traded in the west is paper: fiat or rolled over contracts.  This is Lex Luthor level criminal genius.  And whether I like it or not, I always admire the genius ...

ReturnOfDaMac's picture

Good for you Django, I just want to "PROFIT" on their genius.

tmosley's picture

Gold shops ALL reference spot. They do not set prices.

They are voluntary slaves.

DrumpFired's picture

CME has no control here. Tulip mania here we come.

 

Hats off to Shepwave trades this week. Another good one. 

Golden Phoenix's picture

This Bitcoin pullback has highlighted the rule of buying a fork rumor and selling the news. Part of the responsibility for bitcoin's drawdown is supposed to be Bitcoin Cash. Interestingly Bitcoin Cash is scheduled to technically fork Monday. Does the same logic apply to it or is it different this time?

If the Bitcoin Cash pump were to go to 1k then drop away where does the money go?

 

tmosley's picture

Probably where it came from, which looks like "everywhere else".