What is futures?
Usually, when you buy something, the trade will immediately “settlement”. I will give you $5, you give me three eggplants and the deal is over.
Futures contracts are a bit different. We are not billing now, but we agree to settle at a specific price at a specific time in the future .
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The counterparty is obliged to fulfill the terms of the contract at maturity, that is, once the contract expires, the asset must be bought or sold at a predetermined price. Futures contracts are traded on regulated exchanges and regulated by regulators.
A futures contract consists of two parts – the price and the delivery date.
If I agree to buy 3 eggplants (the underlying asset) for 5 dollars (price) next Monday (delivery date), this is equivalent to a futures contract. There are other details you need to know, but this is the essence of futures contracts.
Who will use the futures contract?
On the other hand, if you produce cigarettes, you might buy tobacco futures so you can lock in the cost of buying tobacco.
In both cases, you are using futures to hedge against future price changes.
For such futures users, buying futures hedge prices rises, and selling futures hedge prices fall .
In the above example, the tobacco-growing party hedges the fall in tobacco prices by selling tobacco futures, while the cigarette-producing party hedges the rise in tobacco prices by purchasing tobacco futures.
2. Traders who want speculative futures price movements
Another group that buys and sells futures is short-term traders, portfolio managers, hedge funds, and speculators in other institutions. Speculators are attracted to futures because of the high leverage of futures and relatively fast price fluctuations .
Speculators don't actually deliver the underlying assets (I can sell oil futures without having to deliver a barrel of oil), and traditional futures contracts are usually settled in cash.
Bitcoin futures is also a futures contract that can be used to speculatively change the price of bitcoin, and participating investors do not need to actually hold bitcoin. Investors in Bitcoin futures are essentially betting on the price of Bitcoin for a specific period in the future.
Current bitcoin futures (such as bitcoin futures launched by CME, BitMEX, OKEx, Nasdaq, etc.) are also cash settled, but Bitcoin futures are expected to achieve bitcoin settlement through exchanges such as Bakkt, LidgerX and ErisX in the future (physical Delivery).
What are the benefits of futures trading?
Is futures leveraged?
Can I buy Bitcoin futures?
How will futures prices be linked to bitcoin prices?
So when you buy a futures contract, you get the benefit of the assets held by others, and at the same time you can use your funds elsewhere and get interest, which is why futures contracts usually have a price that is better than the spot contract. Higher.
How will futures affect the price of Bitcoin?
LidgerX postpones launch of bitcoin futures for physical delivery
But on Thursday morning, CFTC Chief Communications Officer Michael Short said in an e-mailed statement: "LedgerX has not yet been approved by the committee."
In fact, just look at LedgerX's data page and you'll see that only options and swaps occur on Wednesday, and there are no futures trades.
Subsequently, the company's chief operating and risk officer Juthica Chou admitted that the company has not yet traded futures contracts. She said: "We are still operating, we are pushing products to the retail market."
The CFTC approved LedgerX as the designated contract market (DCM) last month, which is one of the two approvals the company needs to continue to launch futures. Another requirement that needs to be approved is to modify the license that has been registered as a Derivatives Clearing Organization (DCO).
LedgerX is currently authorized to liquidate swap contracts, but has not yet been authorized to liquidate futures contracts. In a press release issued by the CFTC on June 25, the regulator stated:
“Since July 2017, LedgerX has been registered as a Derivatives Clearing Organization (DCO), and since June 24, 2019, LedgerX has also been registered as a designated contract market (DCM)… LedgerX has requested CFTC The registration was modified by the DCO to allow LedgerX to clear the futures listed on its DCM because the DCO license limits LedgerX's clearing range to swap transactions."
According to the CFTC, the regulator has 180 days to approve or reject applications for DCO.
Juthica Chou said: "We submitted the amendment on November 8, 2018. It has been more than 180 days. We don't know why this happened [not approved]." Juthica seems to imply that due to this period Already, without the opposition of the CFTC, the company believes it is clear that it can continue.
But a senior CFTC official said that LedgerX needs to be explicitly approved. The official, who asked not to be named, said: "Every new or modified DCO application must be explicitly approved by the CFTC. Failure to make a decision does not imply approval."
Despite this, the senior official said that LedgerX's DCO application "appears to be in the final stages of the approval process."
Bakkt will launch physical delivery of bitcoin futures "in the near future"
Although ICE originally planned to launch the Bakkt platform in December 2018, Bakkt has been postponed several times and there is no definite date for launch. Recently, the Bakkt Bitcoin futures contract is undergoing testing.
Bakkt originally intended to approve its futures contract through the Commodity Futures Trading Commission (CFTC), but has not yet obtained the CFTC-approved custodian status. CFTC Chairman Christopher Giancarlo has talked about the reasons for Bakkt being blocked. He said that one of the challenges facing the organization is to evaluate futures. How the exchange stores cryptocurrencies.
The company is currently awaiting a trust license issued by the New York Financial Services Department (NYDFS). Once NYDFS approves Bakkt's delivery warehouse, the company will be able to launch a bitcoin futures contract for physical delivery.
However, the company is facing competition: ErisX, supported by TD Ameritrade, also plans to launch a bitcoin futures contract for physical delivery, while the LedgerX team, which was originally scheduled to launch a physical delivery bitcoin futures contract on Wednesday, was also “not approved by the CFTC”. And delay.
In addition, ICE Chief Financial Officer Scott Hill said ICE plans to launch the ETF Hub in the coming months, which is a gateway for traders to participate in the exchange-traded fund (ETF) market. The company believes that the ETF market may double in the next few years.