Bonjour it’s me cryptobeak aka that octopus from blue planet. Everyone enjoying those delicious funfair gains? Good because today im going to talk to you about how to protect and prudently invest the capital we gained from FunFair. Just kidding, we are going to jizz it up the wall like fucking always.
So wtf is going on with this whole bitcoin futures business lads?
Futures contracts are simply contracts to buy or sell a commodity for a set price on a set date in the future. I was going to give you an example but I can’t be fucked so go and google it.
Now a key difference between a traditional futures contract and what is actually going to happen in the bitcoin futures market is that the futures will be cash settled, that means that neither The buyer nor the seller will actually give each other bitcoins, they will just settle up the difference in cash. Ie if you bought futures at 15k and in a years time bitcoin is worth 16k then you won’t actually receive a bitcoin, you will just get your profit. 1,000 worthless, pathetic fiat dollars in this case
The reason that the futures contracts being cash settled is important is that it means that buying and selling futures does not affect the price of bitcoin directly, only buying and selling the actual coin does. This potentially means there could be a situation where someone could deliberately risk losing a lot of money in the actual bitcoin market in order to make an even bigger sum in the futures market.
Now it’s possible that all these rich cunts aren’t going to try to manipulate the markets, aren’t going to try to make a load of money off us and are just going to let us gamble on shitcoins in peace, but let’s be honest, that’s pretty fucking unlikely.
So if we assume that some heavy hitters are actually going to try to take advantage of this and financially dominate us like the worthless little pay piggy’s we are, what options do they have?
Option A: They use the futures market to bet on bitcoin going up and then manipulate the bitcoin price by buying a metric wank tonne of them.
Or Option B: they use the futures markets to bet on bitcoin going down and then sell bitcoin all the way down to where their lizard overlords live in the centre of the earth.
Now to me I think the shorting bitcoin into the centre of the earth is more likely.
Currently it is very hard for institutional investors to short bitcoin. We know at least some hedge funds are buying bitcoin already, they can go and buy millions of dollars worth of bitcoin and store it themselves. What they probably can’t do at the moment is tell their investors that they have 100m dollars in a bitfinex account shorting bitcoin and desperately praying that bitfinex does not go fucking busto. Presumably the institutions that are very bullish on bitcoin have already bought a lot, but the institutions that are very bearish have not had the chance to short.
Everyone who really wanted to buy bitcoin has had the opportunity to, however institutional investors have had no real way to short bitcoin up until now, so there is a possibility that there will be legitimately more sell pressure than buy pressure regardless of any manipulation.
Shorting lets the illuminati alien lizard people make a bet on the price of a commodity over which they have some influence, because they would already hold bitcoin. If they are go long they are making a bet before they have any influence over the market, and will then try to gain influence after the bet has been made, by buying bitcoin. This leads into...
The long scenario is not hedged, it is a unidirectional position. These hedge fund pussys really do not like this. If they decide to go long there only plan is to keep buying and buying bitcoin to push the price up, which could well work, but if it doesn’t they’re completely fucked because then they hold overpriced bitcoin which they have lost money on AND they have lost money with their long futures position. On the other hand if they short, they can start selling off bitcoin, but if they realise they can’t exert enough influence over the market to make the price drop then they can simply close their short and hold the rest of their bitcoin as it goes up, so they can win either way.
Everyone knows that at least one group will DEFINITELY be shorting, the miners, we don’t know of any major crypto group that is definitely going to be going long. The miners will be so desperate to short, even if they are not going to try to manipulate the market, so as to hedge against their mining operations. If you have 1 billion dollars worth of bitcoin and equipment and infrastructure to mine bitcoin and tomorrow bitcoin becomes worthless, then you are fucked. However if you have a decent sized short position then you are a lot less fucked as while u are losing all your money in bitcoin you are making a load of money in the futures markets. Bonus points if u own a gigantic mining group that would like to see bitcoin fail and you can actually manipulate the price of it AND you could spend your futures winnings pumping your own coin to flip bitcoin ANDDD your name is Jihan.
The action in bitcoin over the last few weeks suggests the shorting scenario is more likely. It makes no sense to pump the price before your futures bet starts if you are going long because that would make it both less profitable and harder to pump afterwards. The price action makes it look a lot more like a classic pump and dump, with the added benefit of being able to not just dump the coin but also short it while dumping the coin.
I think a lot of this will depend on how much liquidity the big shots can get, and whether it is worth it for them to manipulate the price. The futures market opens in just over an hour and half so I guess we will soon see.
Good luck in whatever the fuck you choose to do with your imaginary internet money this week lads, it could be a mental one.
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