How it Works and How to Reduce It

The markets were euphoric. The community was cheer-leading the imminent launch of Bitcoin futures first on the CBOE and then on the CME. Bitcoin reached its all time high.

They saw this as an indication that institutional investors were just around the corner and that Bitcoin was about to “moon.” Fast forward to today and the feeling is quite the opposite: hodlers are left scratching their heads and licking their wounds.

So, what happened?

While there were a number of factors that drove Bitcoin into one of its worst bear markets to date, one cannot ignore the potential negative impact that these futures had on the market.

In this article, I will take a look at how futures contracts could have been used to skew the markets and why contract delivery is such an important distinction for a futures contract. But first, let’s start with a bit of futures theory.

Cash vs. Physical Delivery

When it comes to futures contracts, there are two main types that exist on the…