Why are there even futures for bitcoin - why not perps only?

J

Jonathan Weissberg

Very curious about this from a market structure perspective...

I can see the most liquid & highest volume contracts in this market are all perpetual swaps, and futures do minuscule volume in comparison - so why are these contracts even kept around, what purpose do they serve, and why can't everyone just be trading perpetual swaps?
 
Are you talking about CMS (Constant Maturity Swaps)? There is zero relationship between the payoffs, market risk, exposure, and counterparty risk of CMSs and futures. I don't get your point.

Halil Hakesem said:
Very curious about this from a market structure perspective...

I can see the most liquid & highest volume contracts in this market are all perpetual swaps, and futures do minuscule volume in comparison - so why are these contracts even kept around, what purpose do they serve, and why can't everyone just be trading perpetual swaps?
More...
 
"A perpetual contract is a special type of futures contract, but unlike the traditional form of futures, it doesn’t have an expiry date. So one can hold a position for as long as they like. Other than that, the trading of perpetual contracts is based on an underlying Index Price. The Index Price consists of the average price of an asset, according to major spot markets and their relative trading volume.

Thus, unlike conventional futures, perpetual contracts are often traded at a price that is equal or very similar to spot markets. Still, the biggest difference between the traditional futures and perpetual contracts is the ‘settlement date’ of the former."

https://www.binance.vision/economics/what-are-perpetual-futures-contracts

It's a contract that's kept in line with the underlying by having a 'funding' period every 8 hours - longs pay shorts if the underlying index is lower, and vice versa...

seems to be the most liquid contract type and in a pure gambl3rs market don't understand why there's any need for traditional deliverable futures of 3m maturities and why they still exist. They persist however, and that's why i'm interested...
 
GRULSTMRNN said:
Are you talking about CMS (Constant Maturity Swaps)? There is zero relationship between the payoffs, market risk, exposure, and counterparty risk of CMSs and futures. I don't get your point.
More...
I'm not sure what any of that is... CMS?

This must be something else because a perpetual swaps tracks the price of bitcoin so the payoff, market risk, exposure and counterparty risk is the same.
 
Because less margin and capital are needed for the normal futures (compared to bitcoin)? Your thread would only make sense if you asked why are there perpetual contracts on bitcoin when they trade close to the real thing? I don't really see the point in that. Might as well trade the real thing...
 
It seems that there is a arb problem for perpetual futures. There is term structure for normal CME futures that involves interest rates, cost of carry, temporary supply constraints, etc. There would appear to be a giant easy arb of just buying perpetual futures and selling back dated monthly futures. Perpetual futures are typically not part of the normal financial system because they make no sense, different dates have different expected prices, and the futures market is based on predicting prices. Perpetuals are not arb-free. If bitcoin was a stable asset and all counter-parties were trustworthy, then everyone should buy perpetuals and sell physical to capture free interest rates. Nobody should sell perpetuals, and nobody should buy physical. A market that fundamentally does not clear, and ripe for manipulation.
 
Regulatory framework is already in place for a futures contract. AFAIK, an FCM has to register as a swaps dealer and this is no small matter. Maybe someone with more industry knowledge could explain why the perpetual futures are not catching on.

Also, this

Halil Hakesem said:
perpetual swaps tracks the price of bitcoin so the payoff, market risk, exposure and counterparty risk is the same
More...

sounds quite dubious. This actually sounds pretty much BS compared to CFTC and the FCM with M2M and all the other jazz (segregated accounts yada yada).
 
tropicalknight said:
It seems that there is a arb problem for perpetual futures. There is term structure for normal CME futures that involves interest rates, cost of carry, temporary supply constraints, etc. There would appear to be a giant easy arb of just buying perpetual futures and selling back dated monthly futures. Perpetual futures are typically not part of the normal financial system because they make no sense, different dates have different expected prices, and the futures market is based on predicting prices. Perpetuals are not arb-free. If bitcoin was a stable asset and all counter-parties were trustworthy, then everyone should buy perpetuals and sell physical to capture free interest rates. Nobody should sell perpetuals, and nobody should buy physical. A market that fundamentally does not clear, and ripe for manipulation.
More...

I didn't follow this. The perpetual holders must pay funding to longs if the contract is below the tracking index, and funding to shorts if the contract is above the tracking index... this keeps it in line.
 
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