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Why the recent move?
Many have speculated, including the author, that the futures market has been given a seal of approval by Bitcoin which has caused a parabolic rise in price. The question is what happens next?
The CME and CBOE plan to launch futures on or around December 18.
According to some of the press releases:
Block Trades will be permitted in XBT futures commencing on Sunday, December 17, 2017 at 5:00 p.m Chicago time and are not permitted prior to that time.
The minimum Block Trade quantity for the XBT futures contract is 50 contracts if there is only one leg involved in the trade. If the Block Trade is executed as a transaction with legs in multiple contract expirations, each leg must meet the minimum Block Trade quantity for the XBT futures contract. Any Block Trade must satisfy the requirements of CFE Rule 415.
The minimum price increment for a Block Trade in the XBT futures contract is 0.005 points USD/XBT.
A person: (i) may not own or control more than 5,000 contracts net long or net short in all XBT futures contract expirations combined and (ii) may not own or control more than 1,000 contracts net long or net short in the expiring XBT futures contract, commencing at the start of trading hours 5 business days prior to the Final Settlement Date of the expiring XBT futures contract.
The foregoing position limits shall not apply to positions that are subject to a position limit exemption meeting the requirements of Commission Regulations and CFE Rules.
Price Limits and Trading Halts:â¨XBT futures contracts are not subject to price limits.â¨â¨Trading in XBT futures will be halted for 2 minutes if during regular or extended trading hours for XBT futures:
* (A) the best bid in the XBT futures contract closest to expiration is 10% or more above the daily settlement price of that contract on the prior Business Day; or
* (B) the best offer in the XBT futures contract closest to expiration is 10% or more below the daily settlement price of that contract on the prior Business Day.
After trading commences following such a halt, trading in XBT futures will be halted for 5 minutes if during regular or extended trading hours for XBT futures:
* (A) the best bid in the XBT futures contract closest to expiration is 20% or more above the daily settlement price of that contract on the prior Business Day; or
* (B) the best offer in the XBT futures contract closest to expiration is 20% or more below the daily settlement price of that contract on the prior Business Day.
The Exchange shall commence a trading halt in XBT futures as soon as practicable, following the occurrence of one of the triggering events set forth above and there may be time between the occurrence of a triggering event and the commencement of the trading halt.â¨The Exchange may extend the time period of a halt pursuant to above halt provisions or halt trading in XBT futures at any time pursuant to any other Exchange rule or policy.â¨â¨For purposes of the above halt provisions, the XBT futures contract closest to expiration shall shift to the XBT futures contract that is next closest to expiration at the end of trading hours for the expiring XBT futures contract at 2:45 p.m. Chicago time on the final settlement date for that contract.
Notwithstanding any of the above provisions, the Help Desk may, in its absolute and sole discretion, take any action it determines necessary to protect market integrity. For avoidance of doubt, this authority includes, but is not limited to, modifying or eliminating the above price movement parameters at any time and/or determining whether to halt or not to halt trading pursuant to the above halt provisions.
Limit up or Limit down !
So what happens if the price over the weekend exceeds the 50 percent margin requirements?
If XBT goes lock limit up, does it push the price of Bitcoin up 100 percent overnight due to the limited supply as a result of sold futures having to cover at any price?
Does lock limit down push cause a market panic causing speculators to liquidate their actual holdings to meet margin requirements?
No one can know for sure but best guess is volatility will likely increase.
The futures price drives the spot
The spot drives the futures
No liquidity in futures market causes a flash crash
A wide bid-ask increases volatility
Bitcoin goes to 100k-1m usd?
No natural sellers cause delisting
This is for informational purposes only
Does not constitute investment advice.
Author may hold Bitcoin
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