Bitcoin Soars After CFTC Approves Futures Trading: First Trade To Take Place Dec.18

Tyler Durden's picture

Bitcoin is back over $10,000 after the the CFTC confirmed what had been previously reported, namely that it would allow bitcoin futures to trade on two exchanges, the CME and CBOE Futures Exchange, also granting the Cantor Exchange permission to trade a contract for bitcoin binary options.

The CFTC announced that through a process known as "self-certification," CME and Cboe stated that their contracts comply with U.S. law and CFTC regulations. The US commodity regulator also said that the it held “rigorous discussions” with the exchanges that resulted in improvements to the contracts’ designs and settlement.

As to when the first bitcoin futures will cross the tape, the CME said it has self-certified the initial listing of its bitcoin futures to launch Monday, December 18, 2017.

Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” said CFTC Chairman J. Christopher Giancarlo. “As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets. In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin.”

Market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority. There are concerns about the price volatility and trading practices of participants in these markets. We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms for potential impacts on the futures contracts’ price discovery process, including potential market manipulation and market dislocations due to flash rallies and crashes and trading outages. Nevertheless, investors should be aware of the potentially high level of volatility and risk in trading these contracts.”

In response to the news, Bitcoin has surged back over $10,000...

... and lifted the entire crypto space higher.

Some more details from the press release:

As trading on these DCMs evolves, the Commission will continue to assess whether further changes are required to the contract design and settlement processes and work with the DCMs to effect any changes.

 

Once the contracts are launched, Commission staff will engage in a variety of risk-monitoring activities.  These activities include monitoring and analyzing the size and development of the market, positions and changes in positions over time, open interest, initial margin requirements, and variation margin payments, as well as stress testing positions.  Commission staff will additionally conduct reviews of designated contract markets, derivatives clearing organizations (DCOs), clearing firms and individual traders involved in trading and clearing bitcoin futures.

 

The CFTC will also work closely with the National Futures Association (NFA). NFA has issued an investor advisory on this topic to its members, including futures commission merchants and introducing brokers that are involved in the trading of any virtual currency futures product, and will closely monitor its member firms trading this product. If the Commission determines that the margin the DCOs hold against bitcoin futures positions is inadequate, it can take measures to require that the margin held at the DCOs be increased, including requiring that they use a longer margin period of risk to generate margin requirements.

 

As with all contracts offered through Commission-regulated exchanges and cleared through Commission-regulated clearinghouses, the completion of the processes described above is not a Commission approval. It does not constitute a Commission endorsement of the use or value of virtual currency products or derivatives.  It is incumbent on market participants to conduct appropriate due diligence to determine the particular appropriateness of these products, which at times have exhibited extreme volatility and unique risks.

 

The Commission, pursuant to its statutory mission, will continue to foster open, transparent, competitive and financially sound markets. The CFTC will monitor markets and work closely with the exchanges to avoid systemic risk and to protect market users and their funds, consumers and the public from fraud, manipulation and abusive practices related to products that are subject to the Commodity Exchange Act.

In other news, it is yet to be determined what initial and variation margin the CME/CBOE will demand for bitcoin trades.

* * *

So what does the start of bitcoin futures trading mean? Here is one explanation as posted last night from DataTrek's Nicholas Colas:

What will the entrance of futures exchanges and bitcoin contracts do to the price?

 

Both the CME and CBOE are set to launch bitcoin futures soon, and today the NASDAQ threw its hat in the ring as well. Moving bitcoin into a regulated structure will allow more sorts of investors and traders to speculate on price moves in the currency. That, the thinking goes, should be good for bitcoin prices.

 

One intriguing point: shorting bitcoin is currently a clunky process, but futures markets will make it much easier. The difficulty of shorting bitcoin has been an underappreciated feature of its meteoric rise, limiting true price discovery. Whether anyone is brave enough to put on a sizable short position remains to be seen. But someone who wants to back up their “Bitcoin is a fraud” talk with dollars will soon have a place to express their viewpoint.

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Latina Lover's picture

The Banksters will try to manipulate the price down via naked short selling, the same way they manipulate the gold and silver prices.  Contracts will be settled in USD.

yogibear's picture

Exactly.

Same as they have been ding with the PMs.

Naked Shorting fest.

dasein211's picture

Difference here is the average person ACROSS the world can buy easily vs being part of CFTC exchange. People can actually buy this easily.

Killtruck's picture

I, for one, am pretty excited to see how this blows up in their faces like a letterbomb.

eclectic syncretist's picture

Does this mean that Bitcoin is now backed by fiat?

MillionDollarButter's picture

Apparently, people don't understand that futures will be used to short bitcoin.

BaBaBouy's picture

Check out what they are short on PM's ...

Welcome To The Machine

http://www.cftc.gov/dea/futures/deacmxsf.htm

38BWD22's picture

 

 

Don't use the futures markets to buy either gold or Bitcoin.

Buy physical!

jcaz's picture

LOL-  this is how you kill Bitcoin-  those boys have no clue what's about to happen......

GoinFawr's picture

You could be right jcaz, but 'those boys' had a clue enough to know which way the wind was blowing to land a 10 plus-bagger (or more), what makes you so sure they're not holding a wet finger to the sky right now?

 

"Fri, 12/06/2013 - 22:58 | GoinFawr

BTC: the gold you can't hold"

You 'sour grapes' types are kind of pathetic, with your short memories and even shorter lived schadenfreude that blows back into your sneering faces while you continue pissing into the wind.

IH8OBAMA's picture

In other news te CFTC has approved a new futures contract on the CME to begin trading in Dog Turds.

 

Gorgeous's picture

Because those too are commodities unlike any other?

"Bitcoin...is a commodity unlike any seen before..."  So unlike, because it isn't a commodity.  Dingbats.

IH8OBAMA's picture

The last thing Coiners should want is something that would make the public and traders take a look at the real value of a Bitcoin.

 

Slomotrainwreck's picture

futures will be used to short bitcoin....

I've got a stash of 100,000,000 paper bitcoins and have programmed my bot to dump them at 17am UT5 on 12/19. I'll make a fortune because I have 200,000,000 shares of short's at $750/ BTC.

nmewn's picture

"If it moves, tax it. If it keeps moving, regulate it. If stops moving, subsidize it." - some old dead white guy. 

Ya nooowah!...it's amazing how many prescient things old dead white guy's said!  ;-)

sodbuster's picture

CFTC- Corrupt Futures Trading Commission- or Cunts, whichever you prefer.

The Black Bishop's picture

Wait....WHAT?! Bitcoin....a COMMODITY?!!!! Just when you thought the world couldnt get more surreal, they up the ante!

 

Bits and bytes flying around on the internet are a commodity....jesus fucking christ.

marysimmons's picture

ZH consistently, and wrongly, tries to correlate BTC price movements with events occurring in the western legacy financial system.  The $USD price of BTC was heading back up anyway, after a much needed 15-20% correction.  Most of the BTC trading occurs in east Asia - Japan, Korea, China.  BTC, and decentralized digital currencies in general, are a planetary phenomenom, not US centric, as the typical American likes to imagine.

Ghordius's picture

+1 yup

and... the same for gold, actually. Asia, particularly China, India, Japan, Russia, Iran, Turkey being all way more important for gold... but somehow still comments of the very US-centric kind

clicks. you give the right bias, you get the clicks and ad revenue

as in There Is No Such Thing As A Free Lunch

as in If It Is For Free... You Are The Product

Crazy Or Not's picture

+1 Agreed!
It really tickles me the insanity of commoditizing a "logarithm" ...while I appreciate that some are doing well from this - good luck BTW. There's a more philosophical view that as a culture we're chasing our tails if Sine's, Cosine's or Tangents have gone up or down this week. - How exactly does that add value to our culture, put food on the table or get something built?
There are bigger questions of the very convienient flash crash every quarter, must be a thrill for HFT crews - easiest money ever.
So way beyond nuts and won't end well.
Gold, Platinum & Silver...oh and Molybdenum...lots of Molybdenum!!! ;)  

Gorgeous's picture

Chromium-Molybdenum is nice too.  Round, octagonal, or fluted.

Ajax-1's picture

Now that Bitcoin is subject to the manipulation of futures trading. BITCOIN IS NO LONGER A VIABLE FREE MARKET ALTERNATIVE TO GOVERNMENT SPONSORED FIAT.

The Black Bishop's picture

Free money for the banking brotherhood of Abraham.

PTR's picture

Unless these exchanges are actually buying bitcoin, or doing margin trading on crypto exchanges (which also requires buying,) these are just naked bets people are making.  BTC is gonna BTC regardless of what people betting on it makes.  The fiat exchanges are just finding new ways to create churn and get cash flow from it.

jeff montanye's picture

curious to see if the c.b.'s and b.b.'s view cryptos as they do p.m.'s.  if so this would make an opportune time to sell the former and buy the latter.  if not cryptos may still have a tear or two left in them.

MonetaryApostate's picture

Bit = Bank of International Transactions Coin..

It hit me like a ton of "BRICS"...

 

Central Bank Controlled?

harrybrown's picture

Bank
Russian
Internation
Chinese
Settlements

mmmmm.... I doubt it, but ya never know!

loves the truth's picture

If they can manipulate the gold prices with a trillion a day going on, just think how easy it will be to move Bitcoin in whatever direction they want.

actionjacksonbrownie's picture

Wait... do you hear that?? I think it's Gold singing "welcome to the jungle, baby - you're gonna diiiiiiiieeeeee..."

RedDwarf's picture

You do realize that in this scenario you outline, trillions of dollars are moving through the BTC network right?  That means BTC will be six figures.

PTR's picture

Exactly.  No one would be selling, and the only bids being taken are for higher and higher prices on the exchanges.

I sure as shit wouldn't sell.  Hodl for life, (or until the next thing comes along in a few years.)

The Wizard's picture

Derivatives, Naked Shorting and Fractional Reserve Banking is a bankster's orgasm.

RedDwarf's picture

"Same as they have been ding with the PMs.  Naked Shorting fest."

Please for the love of God let them try to naked short cryptos.  The carnage that will be wrought by that upon the banksters will be epic.

GoinFawr's picture

Schtum RedD! Schtum! Eyes on the prize.

Rhetorical's picture

Let tgem piss in their sand box. All hail the king.

Drachma's picture

LL, while you may be correct, I think the situation is a bit more complicated. I don't subscribe to the meme that bitcoin is the banksters nemesis. I see this whole blockchain paradigm as something of a brilliant chess move on the part of the powers that be. When I hear so many well-meaning geeks tripping over themselves to extol the virtues of this computational manna from heaven, and heralding the coming victory over their long-standing oppressors through the use of cryptocurrency, my intuition tells me its not that simple, and their is more at play than meets the digital eye.

I personal think they will continue to pump this to the point where most will be convinced they must get on board. Look to the IMF's plans with ACC and the SDR. A one-world currency is right around the corner. Those making fortunes off this current speculative phase are the carrot for the rest. Can anyone deny that emotions are being fabulously manipulated. The established powers think many moves ahead of the rabble.

The best I can sum it up at this point is using the words of Karl Popper; "Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve." In other words people think they understand cryptocurrency and its ultimate role. They are mesmerized, and that frightens me. Just a humble thought. Cheers.

Bendromeda Strain's picture

Before Satoshi was the DARPA white paper. 'Nuf said.

konputa's picture

Yeah I've been saying this for years. And I find it funny that coinerz don't seem the least bit concerned about this and instead ridicule those that bring forward this fact.

Here's one from the past and check out the lack of activity on this article too.

http://www.zerohedge.com/news/2017-06-12/exposed-real-creator-bitcoin-li...

7 comments and less than 31k views as I link to it.

toknormal's picture

How disappointing. I was reading that in avid anticipation of your account of how the mechanics of this 'powers that be loss leader' works and then.....just......nothing.....

Mustafa Kemal's picture

 

""Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve."

Popper is sharp. But I dont get the connection. Does this apply to the bitcoin is tulips theory? Many of its supporters think it is the only possible one.

Indeed, most of their tulip posts seem to

"sign that they have neither understood the theory nor the problem which it was intended to solve."

RedDwarf's picture

So according to you their brilliant chess move is to create a secure decentralized ledger based money that they have no cotnrol over, and when everyone is using that somehow convince everyone to switch to something totally different?  And your fear is that they will somehow pull this off this magic trick and manage to do what?  Reproduce the system they already have right now?  97% of the money is already digital fiat anyway.

You make no sense at all.

ZH Snob's picture

this is an incorrect analysis.  Gold and silver's prices are derived from these exchanges.   Bitcoin's price will always be determined by an open market, then long and short bets will be made about that future price.

Dukes's picture

“Open market” - LOL

jeff montanye's picture

who is to say?  the p.m.'s may very well be near a point of liberation when sufficient physical demand (stand for delivery) outruns the tiny stores of the futures exchanges.  and why wouldn't selling of near term futures affect spot prices with cryptos as they do with other commodities?  of course such exchange moves would be vulnerable to a short squeeze by demanding bitcoins rather than dollars, etc.