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Hello,
A friend of mine is going through the necessary hoops to establish accounts with two cryptocurrency exchanges, Kraken and OKCoin. As far as I know, he only wants to trade Bitcoin. Does anyone know if there's any advantage, monetary or otherwise, to trading through these newbie exchanges rather than simply trading the CME's futures instrument (current contract BTCZ18, at least on Tradestation)? OK, with the CME's product you'd have to roll your position to the new contract four times a year if you're a longterm investor, but it seems to me that this is a minor inconvenience compared to the safety of a regulated futures market, protected by the National Futures Association. I worry that, if these new exchanges go belly-up, how are investors going to get their money back?
Does anyone have any insights into this? If so, any help much appreciated.
Tasuki
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
Negatives
Size.CME Contract size is 5 Bitcoins ($32k), CBOT Contract size is 1 Bitcoin ($6.4k) while the exchanges allow you to trade a lot lot smalller
Bid-Ask/Slippage. I don't know about the exchanges you mention but Coinbase has a much much tighter Bid-Ask then the CME contract. That translates to a lot of slippage
Positives you didn't mention
Fees. Moving money into and out of brokerage accounts (to trade futures) is effectively free, and fees for trading are low. Fees to move money into and out of Cryto Exchanges, and to trade on Exchange in comparison are very high
Thanks for your very helpful answer. Just one question: so, is there a CBOT contract for Bitcoin as well as the CME's "CBT" ??? Very cool that the CBOT has a smaller contract size, but what's the symbol for the CBOT Bitcoin contract?
Many thanks,
Tasuki
I'm considering on creating a bitcoin account for online purchases and I'm considering P2P bitcoin exchanges because of the low fees. However, for any bitcoin exchange are there any hidden or unexpected fees that I might regret for just having an account? I'm new to this so I like to get to know about it before I start transferring money using my Paypal account.
but... have you observed that the CME futures were created at the "Peak Time" of the bitcoin... ?
fwiw... it appears that the pros wanted to ride this bitcoin bubble till the end...
and... since the pros do not enter cheap markets... they created an institutional level product (that too on the well reputed CME)... just to go short...
LOL... reminds me of that movie... (had to google it.... its been a while...)... The Big Short...
That manager went to whatever investment bank (dont remember the name) to create instrument for him to go short...
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
The difference is, in the 2007/8 financial crisis (The Big Short) the entire world was chasing yield and would buy any debt instrument that offered a slightly higher yield. That's who the buyers were of the MBSs / CMOs / CDOs that were created by the Banks for certain customers to short.
Who are the buyers of the Bitcoin futures that the Pro's are selling?
