Jun 12, · After the stock market dropped off by 7% on Thursday, the price of BItcoin plummeted by 9%, indicating that weakness in equities can affect the sentiment around other risk-on . Jan 18, · Conventional wisdom says that even if the Bitcoin bubble pops, as it’s been threatening to lately, the damage won’t spill over into the broad stock market. That’s because in dollar terms, the cryptocurrency craze remains tiny compared to, say, the dotcom boom, which led the broader market to a painful crash in Oct 14, · When you put these factors together, it looks to indicate that Bitcoin will hold strong even in the times of market crash. In fact, recent experiences indicate that a market crash and inflation may act in favor of Bitcoin.
How bitcoin could crash the marketsBitcoin: How Cryptocurrency Could Cause a Stock Market Crash | Money
To get why, you need to understand how futures exchanges work. If you close your trade at a profit, the exchange clearinghouse guarantees payment. They all pledge their own capital as a backstop to keep the exchange running. In it he urged the regulator to require a separate clearing house for bitcoin futures so customer losses do not infect brokers who do not want to be involved.
He was unpersuasive. But no. Good question. To me, that seems extremely unwise. But I expect that will change as the whole world including people who have never before invested in anything falls prey to the bitcoin cult. The Chinese government has cracked down on it, so now the main action is in Japan. Trading on bitFlyer is roughly 25 per cent in actual bitcoin and 75 per cent in derivatives, where customers make leveraged side bets with each other on the bitcoin price.
Actual bitcoins are only a small part of the activity. Whoever it is can lose their money in a flash. Similarly, the US bitcoin futures are zero-sum. In either case, one of you will lose. The open interest in a futures contract can be many times the actual inventory of the underlying asset. This leaves US futures brokers in a bind. Their customers want to trade bitcoin futures, but letting them do it creates risk for the firm, its other clients, and even other clearing firms.
The good news: futures brokers are requiring higher margin deposits on bitcoin than is normal for other products. At least one transmission channel is open now via the futures exchanges, and more will probably follow.
Like other historic bubbles —few of which ended well—bitcoin has:. We may look back at December as the month bitcoin broke the firewall. While the Fed may be raising interest rates, the reality is we still live in a low-yield world. Log in to leave a comment. Sign in. Which I think is total bullshit, personally. In the next bear phase I expect alts to lose a bigger share of their capitalization yet.
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