Bitcoin futures ETF demand surges on trading debut

Overnight said:
There is an aggregate position limit that applies to all listed months combined. I forget the details on the BTC at the CME. For example, the ES is limited to current+2 forward contracts I believe. So you cannot maintain a total position exceeding X through all 3 months on any given day. If you do, you get fined.

(The numbers here are exaggerated, but make the point.)

So on ES, let's call it 5 million contracts aggregate, and 3 million on each month. If you somehow manage to accumulate 3 million on the front month, and 1 million on the next two months each, then you are OK. If you exceed 3 million on the front month, you are in violation of the monthly limit.

If you exceed the 1 million of either of those forwards months while you have 3 million on the front month, you are in violation of the aggregate total across the three months.

What I have seen from the CME's Business Conduct Committee statements is generally a fine, disgorgement of profits and sometimes a trading suspension.

I do not believe any of that will apply to the ETF underwriter.
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Thank you very much for the detailed explanation, Overnight. Futures are too difficult to understand for people like me who don't trade them

Perhaps I'm oversimplifying it but all this demand must mean bitcoin will go up even higher from here?


Four hours into the trading session on its second day listed, America’s first-ever bitcoin futures exchange-traded fund, the ProShares Bitcoin Strategy Fund (BITO), surpassed $1 billion in volume.

“The ProShares Bitcoin Strategy ETF is now one of the most successful launches in ETF history. The initial demand for this ETF is off-the-charts and has exceeded even the most optimistic expectations,” said Nate Geraci, president of the ETF Store. “It’s clear investors and advisors were craving bitcoin price exposure in their traditional brokerage accounts and IRAs.”

https://blockworks.co/bito-on-track-to-be-first-fund-in-history-to-hit-1b-in-aum-in-two-days
 
johnarb said:
...

Perhaps I'm oversimplifying it but all this demand must mean bitcoin will go up even higher from here?...


Four hours into the trading session on its second day listed, America’s first-ever bitcoin futures exchange-traded fund, the ProShares Bitcoin Strategy Fund (BITO), surpassed $1 billion in volume...
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Believe it or not, that is more in your wheelhouse than mine.

Let's look at we have here.

1.) People buy BTC.

2.) People specerlate (sic) on the BTC futures because they think the price will go up.

3.) Now people have a simple ETF they can buy (or short?) because they think the BTC will go up, but it is dependent on the BTC futures going up.

4.) BTC futures will go up only if the BTC itself goes up because people buy BTC, believing it will go up.

So it really comes down to the people like you in the trenches. On something like BTC especially, the base item, the raw crypto itself, drives the futures, which will drive the ETF.

In my time in the futures, I have never heard of the futures driving the base instrument around. Leading it as it were. It has always been the reverse. The base drives the future.
 
Overnight said:
Believe it or not, that is more in your wheelhouse than mine.

Let's look at we have here.

1.) People buy BTC.

2.) People specerlate (sic) on the BTC futures because they think the price will go up.

3.) Now people have a simple ETF they can buy (or short?) because they think the BTC will go up, but it is dependent on the BTC futures going up.

4.) BTC futures will go up only if the BTC itself goes up because people buy BTC, believing it will go up.

So it really comes down to the people like you in the trenches. On something like BTC especially, the base item, the raw crypto itself, drives the futures, which will drive the ETF.

In my time in the futures, I have never heard of the futures driving the base instrument around. Leading it as it were. It has always been the reverse. The base drives the future.
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Got it. Excellent explanation!!

At the end of the day, the demand or lack thereof of the base item will decide direction of the base item price

I watched Trading Places, where before the crops report was released, there was a frenzy on the OJ futures market and the rest was history.... OJ crashed :D
 
Ohhh, Ooooh Johnarb
johnarb said:
Got it. Excellent explanation!!

At the end of the day, the demand or lack thereof of the base item will decide direction of the base item price

I watched Trading Places, where before the crops report was released, there was a frenzy on the OJ futures market and the rest was history.... OJ crashed :D
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Ooooh, I have an important question for you, but have to step away for a couple of minutes. Hold that thought!
 
K, @johnarb So here is the question. Bitcoin trades truly 24/7, yes? It's always running around doing it's thing.

The BTC future price is based on the Bitcoin Reference Rate at the CME. It get's the standard 1 hour break from 5PM ET to 6PM ET.

But what about the ETF? (I know nothing about ETFs) What kind of a break does the ETF have to have, and could it lead to gap-ups and downs? Does the ETF have the same trading hours as the BTC future since it is based on it, or is it like stocks, where basically from 8PM ET to 4AM ET it is closed for trading?
 
Overnight said:
K, @johnarb So here is the question. Bitcoin trades truly 24/7, yes? It's always running around doing it's thing.

The BTC future price is based on the Bitcoin Reference Rate at the CME. It get's the standard 1 hour break from 5PM ET to 6PM ET.

But what about the ETF? (I know nothing about ETFs) What kind of a break does the ETF have to have, and could it lead to gap-ups and downs? Does the ETF have the same trading hours as the BTC future since it is based on it, or is it like stocks, where basically from 8PM ET to 4AM ET it is closed for trading?
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I thought the ETF has worse hours than the CME futures, because it trades in the stock market, so it will have gaps just like the CME bitcoin futures if there's a significant move on the btc spot markets when they are not trading

I'll try to purchase 10 BITO's tonight at midnight and see if's immediate, lol
 
johnarb said:
I thought the ETF has worse hours than the CME futures, because it trades in the stock market, so it will have gaps just like the CME bitcoin futures if there's a significant move on the btc spot markets when they are not trading

I'll try to purchase 10 BITO's tonight at midnight and see if's immediate, lol
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That is what I am wondering. The BTC futures can have a gap for only that one-hour period it is closed.
 
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