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It's for hedging exposure to reduce uncertainty. Futures markets historically reduce volatility and allow hedgers to plan ahead in their businesses. Speculators are there to provide liquidity and aid in price discovery. Yes, lots of caveats, but generally it seems to work. While initial bouts of increased volatility have sometimes come just before ("pre-hedging") and after the introduction of futures, their effect after an initial period has been to markedly reduce volatility. I can't see how BTC could survive without futures, tbh, though I'm actually a pessimist who thinks the blockchain will find other uses. OK, think of bitcoin as a means of exchange. Thing is, it's so volatile and potentially slow that who knows what value you're going to actually get on the other side of a transaction. You transfer one BTC but by the time it arrives at the other side it could be worth $2,000 less, so you're in the hole $2,000? Good grief. Likewise if you accept payment in BTC, you must wait for it to arrive. In an active, healthy futures market, you can dip in and out with extreme speed and ease Futures allow me to hedge transaction, mining and other uncertain time (assuming the futures contracts are actually popular) by hedging. However, because the few people who actually use BTC for something other than speculation probably don't typically send and receive whole bitcoins, or in the CME futures case, five BTC at a time, the futures markets might in fact be useful for... intermediaries? Anyway, BTC is even too wild a ride for futures! Clearing houses (who accept responsibility if losing traders go broke and can't pay what they owe) aren't all so eager to jump in, because, you know, danger. Also, futures markets have price limits that act like circuit breakers to calm things down when the trading gets too insane -- "limit up" and "limit down" -- when trading is halted, and you can neither buy nor sell. This is a dangerous time, and if you've traded on these markets you'll know that you can feel like you're going to have a heart attack when the market is flying dramatically, suddenly trading stops, and you have no idea at what price it will reopen. But BTC has been reaching this kind of limit range with increasing frequency. The various exchanges are constantly trying out new products, and most of them never catch on. So, who knows about BTC. Anyway, if you don't think that Bitcoin should be connected to the rest of the world, including the financial world, then why use them? |