On December 10th the first Bitcoin futures market will open and many people are talking about how this will impact the price of Bitcoin (me included). But one thing I don’t hear people talking about is what if the futures market is a total disaster? I don’t mean its impact on price, but what if the market itself turns out to be a disaster simply because an asset like Bitcoin can’t be effectively traded on a futures market.

First off, let’s look at the typical items traded on futures markets. These are mostly physical items that have a real world use or need. They have a very large real world market so the price has a very historic range for where it trades. Bitcoin is pretty much the opposite of this. The price of Bitcoin has swung as much as $15K in the past few months and there is no history to go by to tell you whether that’s good or bad. Is Bitcoin worth $1 or is it worth $100K. Nobody even knows. Futures markets are for trading items with a somewhat stable price structure that trade within a given range. The futures just provide a hedge in that range.

That brings us to the next topic. Futures markets are where people go for some stability. They go there as a hedge against their other holdings. They don’t go to the futures market for wild and unpredictable volatility. Will traders even want to keep investing in such volatile futures when that’s not really even the purpose of the market in the first place?

Next is the structure and safeguards of the futures market itself. They may not even be able to handle Bitcoin and here is why. Futures markets, as most markets (other than crypto) have what are called circuit breakers. These circuit breakers kick in when prices fall too quickly, and they halt trading. The purpose is so you don’t get flash crashes and also it gives people a chance to catch their breath and make sure they really want to keep selling. But the problem is the CBOE is saying the first circuit breaker for Bitcoin will kick in at a 5% price swing. As anyone who follows BTC knows, 5% is nothing. Just yesterday we had swings of 20% all day long and it wasn’t even that big of a deal for most crypto veterans. Traders in the futures markets have no experience with this sort of volatility.







What all this means is that the Bitcoin futures market may be too volatile for the very people who wanted it in the first place. These people are very big investors with millions of dollars already. If they just keep doing what they are doing, they will have millions more in a few years. They don’t need to risk their money in wildly volatile markets, and this is something most crypto investors don’t understand. Crypto investors are so numb to risk, we assume everyone can handle it. But big institutional investors are more concerned with NOT losing money instead of making huge gains. Like I said, they already have their “lambos” and they just want to keep making money without losing any. This is a key distinction most crypto investors don’t understand. For crypto investors, this is their one life changing chance to make it big. So the risk seems totally understandable. But most big investors don’t think like that all. They already have more money than they need. Now they want to be on cruise control, not risk it all in some wild market.

So what I’m saying is it’s very possible this futures market will be a total disaster. It could become too wild and the people it was meant for may not even like it after a while.

But what does this mean for Bitcoin if this is the case. Well, it’s probably for the best. Futures markets for the most part manipulate prices, so if Bitcoin can avoid this, it’s better for the long term. Not only that, but crypto was never meant to be shoe horned into the existing financial system anyway. It was meant to be different, something totally new.

So the futures markets may turn out to be a failed experiment. But in the end, Bitcoin may come out on top because of it.