What will happen to cryptocurrency after the release on the classic stock exchange?
Few thoughts about Bitcoin futures
If you follow the world of cryptocurrency for a little, you probably heard that bitcoin goes to classic stock exchanges and trades through futures. This news has become really hot and has stirred up the entire crypto-currency market. Why there is so much attention to this event and what it means for the main cryptocurrency — we will talk about it in this article.
What is futures?
The concept of "futures" is not so common and, not many people understand what it really is, except those persons who have some attitude to these futures. But futures were created a long time ago — there is evidence that such an instrument was used by ancient people. We are not sure if the inhabitants of ancient Mesopotamia or Greece operated futures or not, but in our time they have proven themselves on the positive side.
Futures or futures contract:
It is an agreement according to which a particular person undertakes to purchase an asset at a specified price within a designated period of time. If we sort out the details, then we have the following. The buyer purchases 10 contracts for gold at a price of $ 100,000. 10% of this amount he gives as collateral, and indicates the time when, in his opinion, the price will rise to $ 200,000. If the buyer sees a price increase. He can sell futures and make a profit or wait for the contract to be executed on time. In case when the movement of the price of the asset does not reach that level, the buyer will incur losses.
More about futures
In fact, futures trading is the conclusion of a deferred payment transaction. Within the framework of the stock exchange, the two parties agree on that one will buy and the other will sell at a designated price. As a guarantee of the transaction, the amount of the pledge is also the same, it is returned to the buyer after the execution of the futures. If you look at all this action more prosaically, then we have a dispute between those who buy and those who sell. Some of them are confident that the price of the asset will go up, others think differently — that it will fall in a strictly designated period. As a result, one of the parties earns, and the other loses. Here you have all the meaning of futures.
The main feature of futures
An important feature is that futures are an instrument that is more relevant to a commodity group of assets, but not to monetary units. Futures are traded with oil, gold, and gas, and the fact that bitcoin is included in this list also leads to some thoughts. On the one hand, the coin seems to be recognized in the trading offline environment, but at the same time, they treated it more like a commodity than a currency.
Bitcoin futures — A bit of history
The first classical stock exchange, which decided to work with Bitcoin, was the Chicago CME Group, which specializes in trading derivatives. Why did this happen? Why does the stock exchange, which has been operating for more than a century. Sell bitcoin into which the off-line world still does not believe? To understand the essence of the incident, we will return to some years ago. Initially, bitcoin was a toy for IT people. Later enthusiasts of a different kind joined it. In the forefront of investors, who today are millionaires and billionaires, were strangers and lovers of risk.
Further on the cryptocurrency attracted the attention of other investors who realized that first of all the crypt is a technology and very progressive. And, finally, in recent years, bitcoin is beginning to arouse the interest of offline investors and large investment funds. On the one hand, they consider such an investment tool very risky (and it is), but can not pass by such a smart profit. Therefore, for the time being, cautiously, private and institutional investors start investing in the bitcoin and altcoin at small, by their standards, amounts.
The Chicago stock exchange in this case decided to act as an intermediary, which will allow large investors from the real world, to earn on the asset, which is still difficult to trust. Precisely because of high volatility, uncertainty of status and other nuances. Investors prefer to trade not by the bitcoin itself, but by futures on it.
How will futures affect bitcoin?
The consequences of the release of bitcoin on futures trading, we felt "on our own skin." Coins began to gain in price, increasing by several thousand dollars a day, which allowed to reach the cosmic cost of $ 20,000 (at the time of writing this article). But is this event so positive and can it not lead to undesirable consequences? I think that everyone is thinking about what will happen next. But experts do not agree on this, and a large number of them do not express very happy assumptions.
Definitely, the appearance of the main cryptocurrency on the classical stock exchanges is a positive moment. It was finally recognized not as a pyramid or as a deceit, but as a real, worthy financial asset. At the same time, the step towards futures has alienated the crypt from development towards the means of payment. Bitcoin has finally acquired the features of a speculative instrument and its introduction as a global "currency of all currencies" no longer seems so real.
At the moment, there are many scenarios of what consequences the relationship with offline stock exchanges can bring for bitcoin, but the most likely there are two:
- The bitcoin will finally turn into a tool of speculation, and its price will continue to grow. The appearance of bitcoin futures is an opportunity to attract new investors. In particular, banks will now be able to work with him, and hedge funds will turn their attention to it.
- From the technological point of view, the whole market of blockchain-products is too much overvalued today — the soap bubble has grown to unimaginable sizes. Futures trading will only spur an already active growth, but at some point everyone will understand the value of crypto technologies. And when a big explosion happens many people will stay with the empty pockets.
Even now it can be noted that many traders will lose in trading bitcoin futures. This way of earning is interesting because it allows small investors who do not have large sums to join it. At the same time, the whales of the market will not miss the opportunity to manipulate the situation and, certainly, all the bumps will fall on these newcomers.
Regardless of what the future awaits bitcoin and its futures trading, you should not forget the main rules of the investor. As before, you should not invest in the crypto currency those funds that play a big role for you. Do not sell a car, apartment, kidney and other vital values to get the jackpot on bitcoin. The main digital coin can really go up to $ 100,000 per 1 unit, but tomorrow it can collapse to a minimum. After all, a lot of factors affect the currency’s value — for example, tomorrow the states of all countries will agree to ban the freedom-loving coin. This will lead to a serious drop in the price of bitcoin, and investors who have invested the last money in it will go to a deep drawdown and freeze their funds for a long period or fix losses.
Thus, nowadays it is impossible to give an unambiguous answer if the futures will bring benefit or harm to bitcoin. Most likely, in the nearest future we will hear about new price highs, but we still do not know about longer prospects of the main cryptocurrency.