Why futures trading might be bad news for Bitcoin short term


Unless you are living under the rock, you have seen the increasing popularity of Bitcoin and cryptocurrencies. Whether it is just simple Supply and demand or plain old fear of missing out, cryptocurrencies have seen over 1000% increase just this year. However, I feel like some of the recent mainstream acceptance is likely to send the prices down for a while.

Here is my logic behind why bitcoin might take some short term beating or more accurately a correction. One of the main reasons I see this coming is from the opening of bitcoin futures trading. Both CBOE global markets and CME group launched futures trading recently. Historically, when investors feel like something is overpriced or overvalued, they will bet on it to go down using futures trading. This had not been possible for bitcoin so far.

Now, with the introduction of bitcoin futures trading it would not be least bit surprising if investors started making large bets on bitcoin prices to fall and even starting selling sprees to get the ball rolling. 

Even though the futures trading is only for bitcoin and not other cryptocurrencies, the fall of one will also very likely create a network effect of people starting to sell other cryptocurrencies. Given, that a lot of people who had been buying bitcoin or similar digital currencies were simply jumping on the bandwagon without full understanding, they will likely start selling their holdings of other digital currencies as well when bitcoin starts falling. Like any supply and demand in investment, the more people sell the lower the price could get. 

Good thing about the futures market is, at  certain point the big investors will also decide that the price has dropped enough and start making bets for it increase and slowly sending it back up.

For now, all we can do is wait and see when and how everything will unfold. Historically, investors like to sell equity and hold cash before the holidays. Given that, bitcoin futures trading opened up right before the holidays, we could very likely see a major correction right before. 

Of course, these are just my opinions from the outside.