How to Make Money Off Bitcoin by trading Bitcoin futures? What trading bitcoin futures basically is, buying or selling bitcoins for a certain price, without having to own it (it is basically a contract that you will buy or sell it in the future for a certain price), every day you either gain or lose money based on that contract. One of the bad things about it is the “naked short selling” which means that you gain money when the bitcoin market crashes. This will happen because the bitcoin market has a very tiny liquidity.
So if a bank owns 100 000 bitcoins, they can sell them during Christmas, when nobody is trading, which means an incredible downswing. Imagine bitcoin going down 50% in 10 minutes. Those type of things do happen on low liquidity markets and especially now you can earn money by doing it. Trading bitcoins will become a nightmare according to some analysts.
How do cash-settled futures introduce liquidity into the market?
These institutions will not hold any bitcoin, and all contracts will be cash settled. In the short term, bitcoin futures, with high margin requirements, and limited contracts shouldn’t negatively impact the market, especially only representing such a small proportion of the market cap.
However, some people don’t believe this is the end game, they think as the contracts become more readily available, and the requirements loosened, you’re going to have a considerable amount of problems in the market. Bitcoin, and the crypto space, being a highly volatile market, introduces the possibility that people may not be able to settle their contracts if they short or go long on bitcoin. Defaulting on bitcoin futures can cause significant market disruption.
Let’s say, for example, bitcoin goes to $1 from 15,000, and 90% of people cannot settle those contracts- it will create a huge problem. It can bankrupt investors. When they go bankrupt, they lose their digital assets, plummeting prices, and causing a huge sell-off. This is what some traders believe to be the eventual endgame for major institutions. Big banks have been buying up bitcoin over the last several months and will hold a considerable supply. By creating this instrument for investment, they are creating a monster that may very well end crypto trading. They are playing a long game, aimed at tanking down investors, and the whole crypto market. Visit home