Market Monday: Bitcoin Futures Start Trading On CBOE

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Who: Chicago Board of Exchange

What: Bitcoin Futures

When: December 11, 2017

Why: This will allow market participants to have another way to bet on Bitcoin.

My Thoughts

Last month I highlighted that a Goldman Sachs analyst predicted Bitcoin could hit $7,941 and boy did he nail it! Am I the hater here, the old man sitting on his porch shouting get off my lawn? “Everyone is doing it” and Bitcoin surged again when futures trading opened for the cryptocurrency. For those of you who do not know what a futures contract is check out this link here.

I believe having the name of the CBOE behind these Bitcoin futures contracts will cause the price of bitcoin to be even more volatile in the future. This will just give speculators a way to bet bigger and not be forced to hold the actual underlying crypto. With Bitcoin futures contracts each day the parties involved will mark-to-market their positions and someone will have won the day while the other will lose. The guaranteed winner in this scenario is the exchanges. They are the MVP’s moving in on this market to churn a big profit off the Bitcoin craze.

Personally, I will still be staying away. If any of you out there have turned a big profit from the Bitcoin madness kudos to you. No way can I be mad at anyone for making a big bet and cashing in that’s what makes America so great! My only advice would be not to get caught up in the excitement and limit your trading of crypto to only what you can afford to lose. Keep making money and making the naysayers like me look dumb!

What Are Your Thoughts?
  1. Anyone going to trade these futures?
  2. Do you think this will boost the price of Bitcoin or have no effect?
  3. How much money do you think market makers will make during this craze?

Spread The Wealth!

30 Comments on “Market Monday: Bitcoin Futures Start Trading On CBOE”

  1. My husband’s friend said he made a million in bitcoin so far and this was before bitcoin hit $14,000 or whatever it was. I’m staying away too. The intra day variability is ridiculous.
    I too feel like an old fogey, but that’s okay better to be safe than sorry 🙂

    1. I’m with you here Gen Y Money. Did he show you a bank statement? People say all kinds of things. But unregulated speculation is very boom bust. You will eventually be left standing while everyone has a chair. Check out Early Retirement Dude’s article on investing pre-regulation. Makes me glad to be living today.

      Now lets see what I think about DM’s questions:

      – Anyone going to trade these futures?
      You bet! The problem here is how do you price them? For example, if you have corn futures you can look at the weather, or the acreage, or whatever. Bitcoin? Ask your neighbor what they think

      – Do you think this will boost the price of Bitcoin or have no effect?
      I think that it will lead to wild swings. Bitcoin is about psychology and the net effect of millions of people. It’s kind of like riding a wildebeast in the middle of a stampe. Its fun until he turns fast and you fall off. Then watch out for the herd.

      – How much money do you think market makers will make during this craze?
      This is the only winning position, everyone else is just plain lucky. So yeah, tons.

      1. I think you have a point there HM. People tend to say they have made xxx of this and that investment. I have learned that in general most of the time things are exaggerated. If I had made a million in this run up in Bitcoin I would silently be cashing in those profits. I am a fan of stealth wealth though!

        -Are you planning on trading those futures HM?

        -That is true, I think that if other more accepted asset classes correct stocks & real estate Bitcoin will get hammered.

        -Yep I think many entrepreneurs are seeing a chance to cash in. While the big boys have the systems in place to cash in while things are hot.

        1. Well, let me tell you about this fish I caught 😉

          I will not be trading anything Bitcoin. Im not a gambler and that’s just gambling.

          1. Agreed! Maybe I will sit with a laptop by the pool in Vegas and trade it for a couple days instead of hitting the tables.

    1. Hey Tom, you are not alone. I am a big fan of understanding investments I get into. I can rationally see the value of owning a rental property (rent checks) or a stock (dividends). I do not see the value of Bitcoin, other then pure speculation. What does someone receive from owning a Bitcoin other then the hope it goes up? Speculators trade USD as a currency I see Bitcoin as the same thing just more of a frenzy as its new.

  2. Good point: “My only advice would be not to get caught up in the excitement and limit your trading of crypto to only what you can afford to lose.”

    On your questions:

    1. Anyone going to trade these futures?
    – No, I don’t utilize derivatives. I believe futures have a purpose and serve practical uses, but not for Bitcoin.

    2. Do you think this will boost the price of Bitcoin or have no effect?
    – It already has boosted the price, but I believe it will continue to do so. No one knows for certain though.

    3. How much money do you think market makers will make during this craze?
    – No idea. Early-to-moderate adopters could make a lot depending on their entry point and size of investment.

    Balanced Dividends recently posted:
    https://www.balanceddividends.com/landless-landlording-how-and-why-we-use-reits/

    1. -Agreed

      -I think this gives more confidence to those that were on the fence to join the herd…for now.

      -I am referring more so to the brokers and middle men here. I know some of the commissions are nice and large to trade.

  3. I too am relieved to see others with “calmer heads.” The bitcoin run-up is exciting as hell and I’d be lying if I said, I wasn’t feeling the pull to get involved too. However, every time I get ready to fund a coinbase account and join the fervor, I remember my very first foray into investing during the dot com boom. I was about 14 years old and bought a “sure thing” Sun Microsystems at something close to $200 a share (and a PE north of 40). That was about a month before the dot com bubble burst and I lost my shirt.

    No thanks on the bitcoin futures, but good on those who are racking in cash. I hope they take their earnings…

    1. I am right there with you in everything you said. I truly hope that those who are over night millionaires have someone to encourage them to diversify after literally hitting the lottery.

  4. Bitcoin futures are kind of like a fantasy football team. You have a well intentioned plan and direction for the team. But the final outcome is decided by forces over which you have no control. In either case you can be the champ or wondering what happened to all that research and planning…

    1. Haha good point. I think in fantasy football at least you can get an expected value for a player and there is a probability of outcomes. With Bitcoin I think one person is buying and praying the next person will buy for more…that is it.

  5. I don’t know enough about crypto currencies to invest. I am sure there is a lot of money to be made but I will stick with what I know, slow, boring, dividend payers.

    1. Good for you Steve. If I had jumped into everything that looks like the hot new fad I would not be where I am. Actually a friend and I were joking about how we wish we had bought Bitcoin in college instead of trading penny stocks. In reality though we would of sold it of when we made a large gain. When you feel like you are not investing in something that you are nervous about daily how can you invest for the long term? I think early adopters “let it ride” and became over night millionaires because of the low cost when it was launched and then subsequent sky rocketing returns.

  6. I should invested in it when I heard about it five years ago when not a lot of people heard about bitcoin. But with so many aware of it’s rise in value, I will not be part of the crowd that wants a piece of the action.
    When the bitcoin bubble burst and drops 60% or more is when I may invest in it.

    1. Hindsight is 20/20.

      My question though is why would anyone own anything that has no underlying income stream? Similar to gold it is just going to fluctuate to the price that others are willing to pay for it. I don’t want to own an asset like that when what people are valuing it off of is air?

      I mean honestly what is the underlying value? It is a speculative bet nothing more in my opinion.

  7. Still don’t plan on ever touching Bitcoin. Sure, people might make money on Bitcoin now. But when it does crash, it’s going to crash hard. The bigger the bubble, the bigger the inevitable mean reversion.

    1. I am with you there Troy. I have a hard time thinking of it any differently then if a random country issued a new currency. If that currency started shooting up and people talked about it and bought in the price would keep going. Ultimately though everyone is just hoping they are going to be able to sell to someone else down the road.

  8. This bitcoin has exploded so much over the last few years. I remember my friend from school started beting on them back in 2011 and he was constantly talking about it w/ me EVERY single day about it for over a year and kept convincing me to buy and hold haha — that’s when no one gave a damn about it.

    So he cashed out somewhere in 2014ish or 2015 when he already made a crap load but he regrets it so much for what it is today LOL!

    Anyway, I’ll stay out because I don’t understand it, but it’s not a bad idea to gamble a bit as play money as long as you get it and you can afford to lose some. For now, I’ll pass.

    I also heard they might be creating an ETF that tracks the bitcoin futures. Man, I wonder if this will be similar to what happened back in the 2000 w/ nasdaq when a lot of tech companies had such high valuations w/ no actual earnings 🙈……. let’s watch and see if everyone will laugh at the ones who didn’t buy into bitcoin 😭

    1. Hard to be an early adopter and stay invested! Hey I will do the investment tax work for the bitcoin industry one day I don’t have a problem with others getting rich. For every boom story there are multiple busts stories all risk vs. reward! Not worth the risk IMO.

  9. I’m not really into these speculative trades so I try to stay away from everything that has to do with bitcoin. I feel comfortable and can sleep at night with mit dividend stocks. But I would go crazy with something that volatile.

    I think it’s totally fine to buy bitcoin or any futures on it as long as they are just a small portion of your portfolio. 5% in bitcoin could be totally fine. But when I hear stories of people taking out mortgage to buy bitcoin, I just want to crush my head into a wall.

    I don’t really know how futures work but as long as they have to do with bitcoin, I’m out of business.

    1. Haha yeah whenever someone is “betting the house” I get nervous for them. I say more power to the risk takers out there as long as they know it could go belly up tomorrow. Futures contracts have been around forever originally invented as a hedge for industry to lock in prices. The other side of the BITcoin is the speculators! The free market system is amazing.

  10. I don’t know much about bitcoin. But there has been tremendous buzz about it on so many websites and articles written. I think it warrants more research on my end. I may place a small stake in it. It’s a step in standardizing currency and taking us to the next level globally so I think it is a step in an efficient direction. But again I need to do more homework since I’ve crashed and been burned before 🙂

  11. Great article and comments. However, I am not invested in bitcoin. Both of my brothers are lightly invested and they are happy with the returns thus far. I am mainly dividend guy and love those dividend checks :).

    Good Luck.

    Happy Investing.
    TheDividendKarma – TDK.

    1. Love your strategy. I have a feeling you will be more confident in the future with your holdings then those invested in Bitcoin.

  12. Hey DM,

    I believe in cryptocurrency, but not enough in Bitcoin to invest in it.

    I am minorly invested in Ethereum because I think smart contracts will be part of the future. Imagine the efficiency of things like being able to buy a house or car with instant transfer of title (upon payment).

    Investing-wise, I think this is like putting money into a promising penny stock. You may lose it all. But if you win, you may win big. The important thing is to not go crazy with the amount of money you put in!

    1. I am with you there Miguel. I used to trade penny stocks in college and you can ride the highs and lows that is for sure. When I hear people talking about cryptocurrency they generally are just speculators. The early adopters made the boatloads of cash and now I see people trying to time the price and make a quick buck. I am never a fan of get rich quick.

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