- Bitcoin Asset manager claims most firms looking to speculate on bitcoin will use derivatives market instead of the underlying asset.
- The market share of physical oil compared to oil derivatives plummeted when futures trading was introduced.
- ‘Financialization’ of bitcoin will distort its innate pricing mechanism. Don’t count on a halving pump in (******************************************************.
The tendency for bitcoin to multiply in value following regularly scheduled halving. events should not be relied on in (******************************************************.
That’s according to a cryptocurrency asset manager who warned the bitcoin derivatives market may have wreaked havoc with BTC’s traditional pricing mechanisms.
Derivatives Break Pricing Mechanisms
Meltem Demirors, who oversees $ 1 billion worth of assets at CoinShares, said the introduction of derivatives has shifted focus away from the underlying digital asset.
) Demirors says derivatives trading removes the ability for producers of a given product to set prices. She points to theinverse correlation between the rise of oil futures, and the steady decline of physical oil production. shows what’s happened to oil markets over the last years. Derivatives dominate trading. Most firms trade paper contracts to speculate on the price of oil. The market is driven by speculation. Worse still – the success of bitcoin as an investment vehicle may be the very thing that decalibrates its price-to-value equilibrium. Ifbitcoin becomes ‘financialized’ as Demirors warns, it loses any and all factors which once differentiated it from its fiat counterparts. Regardless of the long-term effects of bitcoin’s burgeoning derivatives market, one thing that’s certain is the tendency for paper contracts to siphon trade volume away from the asset in question. Opposite View: Could Futures Trading Be Good for Bitcoin? With just under 150 days left before the next bitcoin block reward halving, is the situation really as bleak as demirors suggests? As one helpful Twitter user pointed out , the introduction of a gold futures market in the s coincided with a massive bull run. The price of gold surged for an entire decade, resulting in an all-time high which still stands to this day. ) The launch of a gold exchange traded fund (ETF) in also coincided With a bull run for the asset. Other factors beyond derivatives trading will also play a part in shaping the value of bitcoin in the coming years. Some view the steady Others claim the halving price pump will arrive before the day itself, asminers scoop up BTC to sell later (*******************. This could result in a strong price increase in the lead up to the halving. But that would be followed by a stunted, or delayed, reaction to the halving itself. This article was edited by (Sam Bourgi) **************************************. Last modified: December (********************************************************************, 2020 (************************************************************************: ********************************************************************* (UTC
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