Bitcoin futures is a new derivative-based technique to trade bitcoin based on future estimations. Following the release of bitcoin futures, someone has bet $1 million that bitcoin cash will reach a value of $50,000 by December, 2018. LedgerX’s CEO has refused to clarify the identity of the investor but says that it is probably an institution.
This bet means that the investor will get 275 bitcoin for $50,000 a coin if the price of a bitcoin cash exceeds $50,000 by December, 2018. However, if the price stays below $50,000 then the investor will lose their $1 million investment.
The trade could be potentially very lucrative, as investors predict that bitcoin cash will reach $1 million a coin. However, when it will reach this value, remains unclear.
Derivatives pave way for a stable market?
Analysts state that inclusion of bitcoin derivatives will pave the way for a more stable market. Derivatives will allow for institutional investors to enter the market. However, the other side of this picture is that it will also make for more risky trades.
The institutional traders will no doubt, stabilize the market. However, amateur traders will be able to trade bitcoin based on pure speculations. The amateur investors will simply try to gain on the long-term speculations. This may cancel the affect of institutional investors.
Jeff Mahony, CEO of UbiquiCoin, told CoinTelegraph:
"Derivatives markets are generally favorable for the underlying securities because they provide the opportunity for more sophisticated institutional investors to enter the market, which generally increases price stability. However, it also creates the opportunity for significantly more speculation and the risk of investors trying to “swing for the fences” based on speculation rather than fundamental analysis.”
However, the latest trade of $1 million may boost the trust of the investors in the market. It may play a pivotal role in attracting investors to invest in bitcoin and let go of the trust issues.