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Last week the first cryptocurrency futures contract in history was traded at the CBOE.  Now it has competition. On Sunday evening, at 5pm, Bitcoin futures started trading at the Chicago Mercantile Exchange (CME).  Let’s take a look at some of the differences and similarities of the two contracts, but pay close attention to the margin requirements; we will make a recommendation at the end.


  • The CBOE uses the symbol of XBT, while the CME is now using BTC. If you access futures on the Think or Swim platform, for example, you would type in /BTC and the January 2018 contract will come up.
  • Neither of the exchanges hold actual Bitcoins, so you cannot take delivery at expiration. Both the CBOE and CME settle in cash.
  • Pricing of the two contracts are different. The CBOE use one price from the Gemini cryptocurrency exchange, while the CME’s contract uses an average from four different cryptocurrency exchanges. Since the price varies widely between these other exchanges, using the CME’s approach seems better.
  • The CBOE margin for its contract changed a lot prior to last week’s first trade. Now, however, it has settled at 44%. Since one contract represents one coin, if that coin is worth $18,000 then the overnight margin will be $7,920.00. Clearing firms, however, are demanding more, with 50% being the current average.
  • The CME margin percentage may be lower, but the dollar margin to trade it will be 5 times larger. The CME contract represents a 5-coin contract; therefore, the same $18k price for one coin will have a notional value of $90,000.00 each. Although the CME margin is lower at 35%, that’s still 35% of a much larger number.
  • Clearing firms will be demanding (from what we’ve read) a 50% margin for both contracts.


As this is being written, the CME Bitcoin futures opening price was $20,650.00.  It is currently at $18,440.00…or a $2,210.00 loss per contract/coin in minutes. So whoever bought the top (open) of the CME contract, is down over $11,000.  And that sort of volatility is why exchange margins are high to begin with, but also why clearing firms want even more.


Since the CME 5-coin contract of Bitcoin will have a margin of roughly $45,000.00 each, it’s fair to call it an institutional product. So if you would like to trade a more modest contract, we would highly recommend that you call the CME directly and ask them to establish a “mini” contract of one coin as soon as possible.


The ratio of the big S&P500 to the e-mini contract is 5-to-1, so with an institutional 5-coin Bitcoin product out, it is quite possible that the CME exchange had this in mind from the beginning. Now it just needs a little push from its customers to roll out the mini-Bitcoin contract ASAP.


*CME Group / Chicago Headquarters

*Phone 1-312-930-1000

*Toll Free (US Only) 1-866-716-7274

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On Thursday, the FCC rule called “Net Neutrality” was repealed by a 3-2 vote.  Although this rule was made by the Obama controlled FCC in 2015 and not voted on by Congress, it seems like a lot of the hysteria surrounding this “rule” doesn’t quite understand this.  Additionally, the complainers don’t seem to understand that the FCC can simply overturn their own rule, which I remind you is only  two years old.

If the lack of this so-called “net neutrality” rule is so important, then it should clearly be debated by Congress and be passed into law by the president, and not by FCC regulators.

The following is a good synopsis of both sides of the issue.


The Mises Institute’s Brian Dellinger to put this decision in context…

On November 21, the Federal Communications Commission announced plans to revisit its Obama-era internet regulations. It seems likely that the resulting vote will repeal the policies often referred to as net neutrality. The name is, perhaps, misleading; to support net neutrality is to support placing the internet more fully under government supervision. The related political debate often divides traditional allies with arguments for free expression pitted against defenses of small government.

To understand net neutrality, one must see its position in technical history. Traditionally, internet service providers (ISPs), such as Comcast and Verizon, have guaranteed their customers a certain quantity of bandwidth – that is, a certain amount of data per unit of time. It was assumed that even a voracious user would rarely use his maximum bandwidth, and services were priced under this assumption. ISPs also de facto allowed customers to access whatever websites they wished; while there was no legal protection for this behavior, technical complexities made discrimination by website infeasible. The result was a largely open web: anyone with a blog could potentially reach millions.

In the early 2000s, the situation changed. Technological innovations enabled providers to determine which site a user visited and so potentially to restrict access. In principle, an ISP could now sell “packages” of websites, in a fashion resembling cable television: “basic internet” for news and Facebook, say, or “premium internet” for those who wanted more. These years also saw the rising popularity of streaming video services like Netflix and YouTube. Users now binge-watched videos, consuming their maximum available bandwidth for hours at a stretch. Such trends increased costs for the ISPs, leading them to investigate new responses: restricted access to high-usage sites, artificially slow downloads, and so on.

Net neutrality stands in opposition to these changes. Broadly, under net neutrality, the government requires ISPs to treat all web traffic in the same way: no limiting access, no reducing speed. Since 2005, the FCC has several times established net neutrality regulations; inevitably, the courts struck down such rules on the grounds that the FCC lacked the authority to regulate ISPs. In response, in 2015 the FCC redefined broadband internet as a telecommunications service, placing it under FCC jurisdiction, and promptly passed net neutrality rules. With the political shift of the 2016 elections, new FCC Chairman Ajit Pai began rolling back these regulations – hence the upcoming vote.

Both sides of the debate have merit. Concerns that ISPs might slow targeted websites are not idle speculation; Comcast did precisely thatto Netflix in 2014. Indeed, Comcast and others have done little to engender public trust in their behavior. Comcast had pledged for years not to “prioritize Internet traffic or create paid fast lanes.” That pledge disappeared from its website less than a day after Pai announced policy changes.

It is also true that the meritocratic nature of the internet – its enabling of anyone to win a following through quality work – has been one of its most notable virtues. A world of “basic internet,” in which new entrants might be simply unreachable, would reduce its value as a platform for new ideas.

Despite these fair concerns, arguments against the FCC rollback seem insufficient. It is difficult to deny that price incentives have drastically shifted over the last decade; if streaming video is generating much of the ISPs’ expenses, it makes intuitive sense that providers might demand Netflix share those costs, or might price service by total consumption rather than maximum bandwidth. Nor are the corporations supporting net neutrality any more trustworthy than the ISPs. Setting Netflix aside, supporters such as Google and Facebook seek to block ISPs from trading in users’ private information – a trade on which these companies themselves depend. For them, net neutrality eliminates the competition.

Other objections rely too heavily on speculation. While a “fast lane” internet would be a marked shift, the brief history of the web is one of constant change. Indeed, the rise of mobile browsing, which often limits the user to app-specific websites and now constitutes a majority of all web usage, may produce a greater alteration than that net neutrality would prevent.

Further, the internet is historically the result of market activity rather than top-down regulations. If one approves of its remarkable evolution to this point, it seems peculiar to assert that this is the moment to freeze it through government action. Given how few accurately predicted that evolution, it seems hubristic to assert how it will change next. Perhaps, as the ISPs argue, the increased revenue from a non-neutral internet would enable the expansion of broadband networks, ending regional monopolies of service providers. Such a change might ultimately produce a faster, more accessible internet – or it might not, but the experiment seems worth the risk.

Finally, whatever one’s feelings on net neutrality, the 2015 rules should be seen for what they are: a staggering expansion of bureaucratic power, by decree of the bureaucracy itself. The result is an ugly patchwork of overlapping authority between the FCC and the Federal Trade Commission, with ISPs disfavored over similar services. This reclassification can never be a stable solution; it will always be vulnerable to precisely the kind of unilateral repeal currently occurring.

If the public supports net neutrality, then let it be defended through the proper channel: by laws, and not bureaucratic fiat.


Since this FCC rule (not a law) has only been in place for two years, I simply don’t understand what all of the hysteria is all about.  Was the internet coming to an end in 2015 without this FCC rule?  No it wasn’t. What’s more, if it is that important, then the boisterous whiners should call their Congressional rep to make it a law.

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Wednesday afternoon was Janet Yellen’s last meeting as Chair of the Federal Reserve.  The FOMC ended its 2-day meeting, with an announcement at 2pm ET and a press conference at 2:30 pm.  Janet Yellen took the opportunity to raise interest rates one last time.  What’s more, the Dot Plot, which is a survey of FOMC members belief of where future rates will be, estimate them to be 2.00% to 2.25%.

During the 2:30 pm press conference, Janet Yellen was asked the usual boring question that allowed to her to drone on about “expectations” and “moderation” and things being “transitory.”  Well, that was the case until Steve Liesman of CNBC got his chance to question the outgoing Chair.  He asked of her: “Every day it seems the stock market goes up triple digits… is it now, or will it soon become a worry for the central bank that valuations are this high?”

Surely she wasn’t expecting such a question so he answer seemed to come in pieces…

‘”The stock market has gone up a great deal this year,” and asset valuations are “elevated.”

“We see ratios in the high end of historical ranges,” but “Economists are not great at knowing what the right valuations are…we don’t have a terrific track record.”

“Low interest rates support higher valuations.”

”The risks in the global economy look more balanced than they have in recent years.”

”There is nothing flashing red there or possibly even orange,” on asset valuations…

Isn’t it amazing that there was some “truthiness” in the beginning of her answer when she said “Economists are NOT great at knowing what the right valuations are…we DON’T have a terrific track record.”

Yet somehow, she simultaneously knows that “there is nothing flashing red there or possibly even orange.”  So this time, she the economist, knows that there is nothing to worry about?  

Yeeaaahhh, sure….that makes sense.

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Bitcoin futures continued to trade on relatively low volume on Tuesday after debuting on Sunday afternoon. The highest daily volume for far was on Monday, where the contract traded well over 3500 contracts. Tuesday’s volume, however, was less than half this number, and it remains to be seen if Wednesday will see yet another decline in volume. As yet, we have not seen a strong increase in trading activity in the contract, leading me to suspect that the marketplace is probably not as big as the activity on the spot exchanges.

But it should also be noted that many brokerage firms have expressed strong concerns about the Bitcoin marketplace, and have either refused to offer trading in the contract for their clients or imposed considerable restrictions on trading activities so as to effectively limit the number of participants who could otherwise participate. The primary concerns voiced include the lack of transparency in the spot market for Bitcoin, the presence or threat of severe market manipulation, and the fact that the futures contracts are disconnected from the spot market in that settlement of contracts cannot be done in Bitcoin itself.

The last concern is not extremely important, but it does present a challenge in that the futures and spot prices can diverge greatly in the absence of efficient means to arbitrage the two markets. Either way, Bitcoin futures continue to trade between $17,000 and $18,500 per contract, and the spot market is essentially range bound as well with trading generally staying within $1K of $17,500.  We’ll continue to update you as the launch of the CME futures contract approaches.

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Bitcoin futures began trading on Sunday afternoon and finished today at $18,545 per contract, ending speculation as to the direction of initial trading interest in the contract. For weeks, we’ve heard TV pundits insisting that short sellers were sitting on the sidelines waiting to slam the futures price, and while this most likely is true, current brokerage firms clearing the contract are reportedly requiring even greater margins then required by the CBOE in order to protect themselves from clients defaulting on market positions in the event of a large price move in the spot market.

Already, fears are high that spot market participants will deliberately manipulate Bitcoin prices in order to force futures prices to move aggressively again open positions. While it is clear the the spot Bitcoin markets are rampant with manipulation by the major exchanges and their larger participants, the potential gains for long futures positions should keep well-capitalized participants in the markets and willing to weather any potential volatility.

It remains to be seen how the short side of the market will develop, but I suspect that only the largest players will be able to afford sit on that side of the trade comfortably. And it is clear that, so far, major money is still sitting on the sidelines, given that less than 4,000 futures contracts traded during the first day. This places volumes at the very lowest ranges of US futures contracts. Since some firms are already submitting proposals with the SEC to create ETFs based upon Bitcoin futures, we should be able to see a strong boost in trading interest pending the SEC approval of the funds. Until then, we’ll keep an eye on CBOE futures and look ahead to the launch of CME futures on December 18th.

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Bitcoin futures opened for trading on the Chicago Board of Options Exchange (CBOE) on Sunday evening here in the United States, and the contract immediately rallied to where it almost reached $20K per Bitcoin. The CBOE’s Bitcoin futures contract has a leverage of 1 Bitcoin per contract, and traded over 2800 contracts in total as of early Monday morning. However, while this volume is rather low in terms of futures contract standards, where a daily volume of 30,000 contracts is usually considered to be very low volume, we can reasonably expect volumes to pick up as the contract becomes more popular.

The current front expiration contract is symbol XBT/F8. It opened trading on Monday at $15460 and reached a high of $18,810 by around 4AM Eastern time, only to drop sharply from there to retrace back to roughly $17,700 per contract. Meanwhile, the benchmark Bitcoin index used by the CBOE to track the value of Bitcoin for settlement purposes was around $16,500 at the same time. The index is called the Gemini Bitcoin Trade Index (INDEXCBOE:GXBT). It goes without saying that larger traders are likely to focus on arbitrage opportunities between the futures and spot markets for Bitcoin, and it is expected that this will cause Bitcoin’s notorious volatility to settle into a more stable range. However, seeing that the futures traded almost immediately to a 20% gain in initial trading, I think this might be too early to expect that to occur. We’ll continue to focus on Bitcoin as futures trading develops.

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Yesterday we joked about how quickly Bitcoin was growing up with this comical comment: “It was just a short time ago that our little son seemed like an infant. Look at the pictures of him: just mere change on the floor; miniscule satoshi’s to be sure.” Ha ha!  That’s what Mr. & Mrs. Bitcoin would be saying today as they looked upon the value of their currency-like son. The wee-lad of a few cents per coin has grown into a redwood tree!  It’s now a hulking mass of ‘money’ all over the place. Last night the price of Bitcoin traded north of $14,000 on one of the most popular crypto-exchanges; however, just a few hours ago it already traded $15,000!”

How right we were!  Bitcoin must be suffering from Gigantism, which is a rare disorder resulting from increased levels of growth hormone before the fusion of the growth plate which usually occurs at some point soon after puberty.  Bitcoin is still young indeed, barely past its puberty stage with spots (acne) and all.  It “grew” so much Thursday that it nearly traded $20k! (reminder, early Thursday morning it was at $14k)

The spike in the middle is where it nearly reached $20,000 per coin, but then dropped over 20%.

For those keeping track, this is how long it has taken the cryptocurrency to cross the key psychological levels:

  • $0000 – $1000: 1789 days
  • $1000- $2000: 1271 days
  • $2000- $3000: 23 days
  • $3000- $4000: 62 days
  • $4000- $5000: 61 days
  • $5000- $6000: 8 days
  • $6000- $7000: 13 days
  • $7000- $8000: 14 days
  • $8000- $9000: 9 days
  • $9000-$10000: 2 days
  • $10000-$11000: 1 day
  • $11000-$12000: 6 days
  • $12000-$13000: 17 hours
  • $13000-$14000: 4 hours
  • $14000-$15000: 10 hours
  • $15000-$16000: 5 hours
  • $16000-$17000: 2 hours
  • $17000-$18000: 10 minutes
  • $18000-$19000: 3 minutes


What will it be like when the CBOE opens its Bitcoin futures on Monday…then the CME the following Monday?  We can’t wait!

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“It was just a short time ago that our little son seemed like an infant. Look at the pictures of him: just mere change on the floor; miniscule satoshi’s to be sure.” Ha ha!  That’s what Mr. & Mrs. Bitcoin would be saying today as they looked upon the value of their currency-like son.

The wee-lad of a few cents per coin has grown into a redwood tree!  It’s now a hulking mass of “money” all over the place. Last night the price of Bitcoin traded north of $14,000 on one of the most popular crypto-exchanges; however, just a few hours ago it already traded $15,000!

Will it pause before it makes another 100% gain?  Or will it just make like a central bank-rigged stock exchange and close slowly but surely higher day after day?  Hmmm, one wonders!?

From ZeroHedge we read the following:

One of the regions in the world with the most active Bitcoin community is South Korea where so many Koreans have embraced bitcoin that the prime minister recently warned that cryptocurrencies might corrupt the nation’s youth.

As Bloomberg reports, while neighboring Japan hosts more transactions by some measures, Korea punches far above its weight: In the 24-hour period through Wednesday evening in Seoul, about 21 percent of the world’s bitcoin trades on fee-charging venues involved the Korean won, according to Coinmarketcap.com. The country accounts for about 1.9 percent of the world economy.

As Korean policy makers grow increasingly worried that the mania has gone too far, the nation could become a focus for bitcoin traders around the world. Korea’s top financial watchdog, which briefly roiled cryptocurrency markets with its ban on initial coin offerings in September, said this week that it has “grave concerns” about overheated speculation and has formed a task force with other government bodies to increase supervision.

While it’s unclear what measures will emerge from Korea’s cryptocurrency task force, the government seems intent on acting. The tax authority is considering a levy on cryptocurrency trading gains, Yonhap News reported on Tuesday, while Prime Minister Lee Nak-yon warned last month that cryptocurrencies could become gateways to pyramid schemes and other illicit activity if left unchecked.


Like so many S&P500, Dow, and Nasdaq investors; Bitcoin buyers wonder if there will be a CONTINUATION of the current “Santa Claus” (never-ending) rally?  An answer calls out from the mist that says, “Why not? If you just believe and click those ruby shoes together, you can go back to Kansas a mega-winner. So yes Scarecrow, it can go up forever!”

I would buy it too, but I’d rather buy a pull-back. Funny thing is – that never seems to happen in Bitcoin (and centrally-planned equities).

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The Senate Banking Committee approved Jerome Powell as new FOMC Chair by a wide margin, with only Senator Elizabeth Warren voting against his nomination. Powell was originally nominated to the Federal Reserve’s board by President Obama, and therefore he already had considerable support among both parties leading up to his current nomination. However, it was not surprising that Senator Warren voted against him, seeing that she was highly skeptical during his confirmation hearing with respect to his firm statements advocating some rollbacks and modifications of Dodd-Frank regulations. Warren had been a long time advocate of the need for such reforms long before the financial crisis, and generally has a strong tendency to advocate very extensive regulation. However, Powell is more favorable to loosening some of the constraints brought about by Dodd-Frank, arguing that some of the regulations made at that time have been shown to need revision or elimination.

The financial markets immediately rallied after Powell’s nomination was confirmed, leaving little doubt that traders generally see him as a mild reformer who will not advocate any aggressive changes, and will generally favor policies aligned with the desires of the market. Powell’s opinions on interest rates and unwinding the Fed’s balance sheet seem to be aligned with those of outgoing Chairperson Janet Yellen, leading me to expect a smooth transition of leadership. Powell was also criticized during his confirmation hearing for being to willing to vote along with the rest of the board by Senator John Kennedy, suggesting that the Senator didn’t see Powell as being sincere in his calls for moderate reform. However, with the 22-1 vote in favor of Powell, it seems clear that the Banking Committee is indeed comfortable with him as the new leader of the FOMC.

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British Prime Minister Theresa May decided to withdraw from the Brexit divorce deal after the European Union refused to accept her demand for a time limit for EU judges to have authority over EU citizens living in Britain. This maneuver was clearly intended by May as a measure to protect British autonomy from the authority of the European Union, which is of course a key reason behind Brexit. The proposal was to allow the EU to continue to have jurisdiction over EU citizens living in Britain until after Brexit is completely. However, the EU refused to accept these terms, but offered instead to allow a small number of cases to qualify for exclusion from EU jurisdiction, but only on a limited bases.

The refusal from the EU to remit legal jurisdiction over EU citizens after Brexit has caused outrage amongst Brexit supporters. They perceive this move as yet another example of unwillingness by the EU to honor British sovereignty. Meanwhile, the financial markets may be expected to respond to this news negatively, since it means that Brexit negotiations are receiving yet another setback, adding to the uncertainty that investors have been dealing with since the original vote by Britain to leave the union. Ultimately, we can expect weakness in the British pound as well as a softening of British equities while the situation is still in limbo.