Futures markets create an immense amount of flexibility. They enable investors to readily bet on an asset or bet against it (go long or go short), and they are usually characterised by an immense amount of leverage. In the case of bitcoin, this means one can trade a high volume of coins while only paying for a fraction of them, essentially operating with borrowed money. Leverage is used to amplify profits on a small volume of assets, but it is a double-edged sword in that it also amplifies losses.
Hey Will. Thanks for the helpful guide! I’ve just gotten into crypto and found this info extremely useful. Just a question regarding how you keep your alt coins safe. As far as I can tell, you can’t keep many of these alt coins on a Trezor hard wallet, so do you just use something like My Ether Wallet instead? Cheers mate! Here’s to a cracking 2018!!
A bitcoin exchange operates somewhat similarly to online stock trading brokers, where customers deposit their fiat currency (or bitcoins) to carry out trades. However, not all bitcoin exchanges offer such services. Some exchanges are more like wallets and thus provide limited trading options or storage of currency (both digital and fiat) for trading. The bigger and more elaborate exchanges offer trades between different cryptocurrencies, as well as between digital and fiat currencies. The number of currencies supported by an exchange varies from one exchange to another. (For more, see: Why Is Bitcoin’s Value So Volatile.)
A Fund may invest in exchange-traded funds that are organized as trusts. An exchange-traded trust is a pooled trust that invests in assets, including physical commodities, and issues shares that are traded on a securities exchange. When the pool of assets is fixed, exchange traded trusts are treated as transparent for U.S. federal income tax purposes, and thus, the Fund will be treated as holding its share of an exchange traded trust’s assets, and the Fund’s sale of its interest in an exchange-traded trust will be treated as a sale of the underlying assets, for purpose of determining whether the Fund meets the 90 percent gross income test described above . As with investments in commodities and similar assets investments in exchange traded trusts may generate non-qualifying income for purposes of this test. As a result, a Fund’s investments in exchange traded trusts can be limited by the Fund’s intention to qualify as a RIC, and can bear adversely on the Fund’s ability to so qualify.
Localbitcoins is the portal that exchanges trades between person to person where you interact with the seller directly. On this platform, people from different countries can exchange their local currency to bitcoins. The site is suggested for casual traders seeking more privacy. The site uses an escrow system and the transfer of bitcoin is made after funds are received in the sellers account. Registering, buying and selling is completely free on localbitcoins while local bitcoin users who create advertisements charges 1% fee for every completed trade.
To the extent that an Underlying RIC realizes net losses on its investments for a given taxable year, a Fund that invests in the Underlying RIC will not be able to benefit from those losses until (i) the Underlying RIC realizes gains that it can reduce by those losses, or (ii) the Fund recognizes its share of those losses when it disposes of shares in the Underlying RIC. Moreover, when a Fund makes such a disposition, any loss it recognizes will be a capital loss. A Fund will not be able to offset any capital losses from its dispositions of shares of the Underlying RIC against its ordinary income (including distributions deriving from net short-term capital gains realized by the Underlying RIC). In addition, a portion of such capital loss may be long-term, which will first offset the Fund’s capital gains, increasing the likelihood that the Fund’s short-term capital gains will be distributed to shareholders as ordinary income.
As discussed in more detail below, FATCA (as defined below) generally imposes a reporting and 30% withholding tax regime with respect to certain U.S.-source income (“withholdable payments”) paid to “foreign financial institutions” and certain other non-U.S. entities when those entities fail to satisfy the applicable account documentation, information reporting, withholding, registration, certification and/or other requirements applicable to their status under FATCA. A Subsidiary will be subject to the 30% withholding tax in respect of any withholdable payment it receives if it fails to satisfy these requirements, as may be applicable to the Subsidiary. Each Subsidiary expects to satisfy these requirements, as may be applicable to it, so as to avoid this additional 30% withholding. See “Certain Additional Reporting and Withholding Requirements” below for more discussion of these rules.
The CME Bitcoin futures contracts will be cash-settled, meaning that you will receive USD on the expiration date if your speculation was successful and you have not sold the derivative before the expiration date. You will not receive Bitcoin – that would be a physical settlement, even though Bitcoin is not a physical asset. This is a crucial difference because it enables traders to trade in Bitcoin futures without having a cryptocurrency wallet. Every transaction is done in USD.Thus, it is easy for mainstream traders to take part in this market.
Update 1st October 2018: The cryptocurrency market has been volatile as ever over the last 6 months. Unless you are a skilled trader, it is harder to make money in a bear market than in a bull market – and we have been in a bear market for some time now. Personally, I have stopped trading and I am now focussing on growing my portfolio passively using a cryptocurrency trading bot – you can find out more about this here. If you are new to crypto, read on!
Assume it is January 3, 2015. Bob and Ann both want to trade at Bitcoin Futures Exchange (BFE). BFE offers 3 different contracts: one expiring and settling on Friday January 9 ('weekly'), another expiring Friday January 16th ('biweekly'), and finally one expiring in March 27 ('quarterly'). Each contract is worth 1 bitcoin notionally. BFE has a policy that traders have to put 20% of margin down to enter a trade, so Bob and Ann deposit 0.2btc to their BFE accounts as they only want to trade 1 contract.
Don’t FOMO. This is a spot that people most frequently lose money on. A dash of manipulation, two tablespoons of media hype, a cup of CME and CBOE announcements, and a generous handful of FOMO drove Bitcoin prices from $10,000 to $20,000 in December. Since that time, Bitcoin fell to a low of $9,000 and is currently sitting at around $11,000. It’s easy to look back and say, “if only I waited one month, then I could’ve bought at $9,000 instead of waiting for Bitcoin to hit $20,000 again for me to break even.” But the reality is, the combination of 1) being greedy, 2) investing blindly, and 3) FOMO were likely large contributors to the purchase at an all-time-high. Even in the crazy world of cryptocurrency, if a coin pumps that quickly, it will correct — it’s a matter of time. Speculative pumps are almost always followed by dips. While trying to jump onto a train going full speed sounds like something straight out of a James Bond movie, I’m sure most of us can agree we would probably save some limbs if we just waited for it at the next stop.
Source: MV Index Solutions GmbH (MVIS®). MVIS is a wholly owned subsidiary of Van Eck Associates Corporation. Data as of December 8, 2017 (synthesized data from BitMEX, OKCoin, CryptoFacilities, and BTCC which represents non-U.S. listed bitcoin futures trading on these exchanges). Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue.
The Trust and the fund have obtained an exemptive order from the SEC allowing a registered investment company to invest in the Fund’s shares beyond the limits of Section 12(d)(1) subject to certain conditions, including that a registered investment company enters into a Participation Agreement with the Trust regarding the terms of the investment. Any investment company considering purchasing shares of the Fund in amounts that would cause it to exceed the restrictions of Section 12(d)(1) should contact the Trust.
Anyone interested in buying bitcoins needs to deposit funds in U.S. dollars, euros, or another currency supported by the exchange. The popular methods of transferring money to the currency exchanges are through bank wire transfers, credit cards, or liberty reserves. One of the pre-requisites here is to have a digital wallet to hold bitcoins. Bitcoins bought can be stored in a digital wallet, device, or paper wallet, depending on the buyer’s preference. For sellers, the fait currency for which the Bitcoins have been sold needs to be withdrawn from the exchange and sent to a bank. One issue that can arise is if the exchange has liquidity concerns at a particular point in time; such situations can delay withdrawal and transfer of funds into a bank account. (For more, see: A Look At The Most Popular Bitcoin Exchanges.)
• Active Management Risk — The performance of actively managed funds reflects, in part, the ability of ProShare Advisors to select investments and make investment decisions that are suited to achieving the Fund’s investment objective. ProShare Advisors’ judgments about the Fund’s investments may prove to be incorrect. If the investments selected and strategies employed by ProShares Advisors fail to produce the intended results, the Fund may not achieve its investment objective and could underperform other funds with a similar investment objective and/or strategies.
Under current law, income of a RIC that would be treated as UBTI if earned directly by a tax-exempt entity generally will not be attributed as UBTI to a tax-exempt entity that is a shareholder in the RIC. Notwithstanding this “blocking” effect, a tax-exempt shareholder could realize UBTI by virtue of its investment in a Fund if Shares in a Fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code section 514(b).
Each Fund intends to use, on a regular basis, leveraged investment techniques in pursuing its investment objective. Leverage exists when a Fund achieves the right to a return on a capital base that exceeds the Fund’s assets. Utilization of leverage involves special risks and should be considered to be speculative. Specifically, leverage creates the potential for greater gains to Fund shareholders during favorable market conditions and the risk of magnified losses during adverse market conditions. Leverage is likely to cause higher volatility of the NAVs of these Funds’ Shares. Leverage may also involve the creation of a liability that does not entail any interest costs or the creation of a liability that requires the Fund to pay interest which would decrease the Fund’s total return to shareholders. If these Funds achieve their investment objectives, during adverse market conditions, shareholders should experience a loss greater than they would have incurred had these Funds not been leveraged.
Non-Diversified Status (All Funds, except the S&P 500 Dividend Aristocrats ETF, the S&P MidCap 400 Dividend Aristocrats ETF, the Russell 2000 Dividend Growers ETF, the MSCI EAFE Dividend Growers ETF, the MSCI Europe Dividend Growers ETF, the MSCI Emerging Markets Dividend Growers ETF, the DJ Brookfield Global Infrastructure ETF, the Equities for Rising Rates ETF, the S&P 500 Ex-Energy ETF, the S&P 500 Ex-Financials ETF, the S&P 500 Ex-Health Care ETF, the S&P 500 Ex-Technology ETF, the High Yield—Interest Rate Hedged, the Investment Grade—Interest Rate Hedged and the Short Term USD Emerging Markets Bond ETF the ProShares Bitcoin Futures/Equity Strategy ETF, and the ProShares Bitcoin/Blockchain Strategy ETF)
You may wonder: where do these contracts come from? We know on the spot market that bitcoins are being bought and sold for fiat, but how the heck are bitcoins being used to trade bitcoin futures contracts? Let's walk through a really simple example showing how an exchange functions when there's just a simple two traders who want to go long and short.
Because only a few regulations implementing the straddle rules have been promulgated, the consequences of such transactions to the Funds are not entirely clear. The straddle rules may increase the amount of short-term capital gain realized by a Fund, which is taxed as ordinary income when distributed to shareholders. Because application of the straddle rules may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, the amount which must be distributed to shareholders as ordinary income or long-term capital gain may be increased or decreased substantially as compared to a Fund that did not engage in such transactions.
I’m an elderly gentleman, closing in on 68 years of age. My son introduced me to Crypto in late 2012. After doing a lot of researching Btc I felt strongly that It had a lot of growth and potential ahead of it. So my son and I built my 1st rig and I started mining in January 2013, pulled $5,000 from my IRA and bought Btc at $13.44 and have never looked back since. The sweetest sound that I’ve ever heard was the clink of my 1st mined Bitcoin way back when. That was as satisfying a note as there ever was on any musical scale. Nothing but happy days ahead since. Don’t get me wrong, there have been bumps in this Crypto highway, the demise of the Silk Road, Mt Gox, DAO hack to name a few but as a HOLDer (holding on for the long duration) not a HODLer (hanging on for dear life) and not day trading, has rewarded me with quite a decent profit. It just takes a lot of patience (Sisu) and doing your research with due diligence. I have since invested in Ethereum (Dec 2015), Monero (Jan 2016) and lately Omisego (July 2017) all purchased from some of my profits from Btc to go along with my newly acquired free Bch and recently free Omg. I’m currently operating 3 rigs equipped with 6 gpus each. 2 mining Eth and 1 Monero for now, all of which will be re-evaluated after Metropolis kicks in to see which direction I go from here. So I ‘m back to doing more research in order to help with my next moves but I’ll always be a strong believer in Ethereum which is where I’ve made my money so far. HOLDing on to the rest for now. Btc $5,000-10,000, Eth $2,500- 5,000, Monero $200-400, Omg $100-1,000 no one ever really knows but MY research says yes and so far MY research has not proven me wrong. Bought Btc at $13.44, Eth at .80, Monero at .48, Omg at .43 Bch for free. No where to go but up for me. Just biding my time. It’s taken me over 4 and a half years to get here but I’ve made over $4,000,000 so far with just my original investment plus the cost of my rigs and I’m still sitting on a lot more. Taking a position and HOLDing is where the real profit is and it isn’t going to happen overnight. So if you want aggravation and ulcers go ahead and day trade, try and beat the Market I wish you luck but the real money comes with Research, HOLDing and Patience. Hope this advice helps because in the long run what it all comes down to, its just Eths, You and Me hopefully making the right decisions.
A large investor tends to have portfolios that are diversified enough that they can stomach deviations from expected price movements even with leverage. But smaller investors have smaller accounts, and that is where leverage can be fatal. This is because amplified losses can grow larger than the account balance and cause the need for a margin call when facing the prospect of going into severe debt.
While cryptocurrencies are digital currencies that are managed through advanced encryption techniques, many governments have taken a cautious approach toward them, fearing their lack of central control and the effects they could have on financial security. Regulators in several countries have warned against cryptocurrency and some have taken concrete regulatory measures to dissuade users. Additionally, many banks do not offer services for cryptocurrencies and can refuse to offer services to virtual-currency companies. Gareth Murphy, a senior central banking officer has stated "widespread use [of cryptocurrency] would also make it more difficult for statistical agencies to gather data on economic activity, which are used by governments to steer the economy". He cautioned that virtual currencies pose a new challenge to central banks' control over the important functions of monetary and exchange rate policy. While traditional financial products have strong consumer protections in place, there is no intermediary with the power to limit consumer losses if bitcoins are lost or stolen. One of the features cryptocurrency lacks in comparison to credit cards, for example, is consumer protection against fraud, such as chargebacks.
There are many groups on Facebook where you can find likeminded folks who will happily talk crypto all day but the problem is that 99% of these groups are filled with people who have only a very basic understanding of cryptocurrency and the knowledge available here is not particularly strong. I have recently left almost every single group on Facebook as, in my opinion, they are largely filled with FUD.
Last night, Cboe XBTSM Bitcoin Futures commenced trading on the Cboe Futures Exchange. The launch was smooth, although our website experienced some issues due to an overwhelming number of hits looking for the trading data. Now that the futures are up and running, it may be time for a brief explanation of how an owner of bitcoins may use futures to hedge their position.
• If a Fund qualifies for treatment as a regulated investment company, it is not subject to federal income tax on net investment income and net realized capital gains that the Fund timely distributes to its shareholders. If a Fund were to fail to so qualify, and were ineligible to or otherwise did not cure such failure, its taxable income and gains would be subject to tax at the Fund level, and distributions from earnings and profits would be taxable to shareholders as ordinary income.
The promoters of these products promise traders a way to beat the market by arbitraging prices between different exchanges. Don’t believe the hype. Bitcoin exchanges often have expensive withdrawal processes and hefty fees for trading bitcoin with fiat currencies, such as dollars or euros. Also, settlement of bitcoin trades can take hours. These factors will eliminate any profits from bitcoin arbitrage and may even lead to losses.
RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE RUSSELL INDEX OR ANY DATA INCLUDED THEREIN AND RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY PROSHARES TRUST, INVESTORS, FUND SHAREHOLDERS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL INDEX OR ANY DATA INCLUDED THEREIN. RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RUSSELL INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
For each of the following Funds that hold Non-U.S. Investments: the DJ Brookfield Global Infrastructure ETF; the Global Listed Private Equity ETF; the MSCI EAFE Dividend Growers ETF; the MSCI Europe Dividend Growers; the Short Term USD Emerging Markets Bond ETF; and the Merger ETF (each a “Global Fund” and collectively the “Global Funds”), when a purchase order is placed, the Distributor will inform the Advisor and the Custodian. The Custodian shall cause local sub-custodians of the applicable Global Fund to maintain an account into which the Authorized Participant shall deliver, on behalf of itself or the party on whose behalf it is acting, the Deposit Securities “free of payment,” with any appropriate adjustments as advised by the Trust, in accordance with the terms and conditions applicable to such account in such jurisdiction. If applicable, the sub-custodian(s) will confirm to the Custodian that the required Deposit Securities have been delivered and the Custodian will notify the Advisor and Distributor. The Authorized Participant must also make available to the Custodian no later than 12:00 noon Eastern Time (or earlier in the event that the relevant Exchange or the relevant bond markets close early) by the second Business Day after the order is deemed received through the Federal Reserve Bank wire transfer system, immediately available or same day funds in U.S. dollars estimated by the Trust to be sufficient to pay the Balancing Amount next determined after acceptance of the purchase order, together with any applicable Transaction Fees. For Global Funds, the Index Receipt Agent will not make available through the NSCC on each Business Day, the list of the names and the required number of shares of each Deposit Security to be included in the current Portfolio Deposit.
Bitrex provides comprehensive vetting of new Cryptocurrency tokens and places a strong emphasis on user security. Hence has the reputation for being a secure wallet with a good security module. The platform trades vastly in Altcoin. Trading fees at the platform are 0.25 %. The minimum transaction fee of the blockchain governs the charge for deposit and withdrawal.
Poloniex is an asset exchange based in the US. Trading on Poloniex is secure and allows traders to explore new and trendy coins which are up for speculation. It offers high volume margin trading and lending service for major crypto assets. Reportedly, the largest user base for trading on this site comes from Russia (6.06%) and US (24.84%). A differentiating factor about the site is that it does not support fiat currency.
Litecoin (LTC) is similar to Bitcoin in many of its characteristics and is also one of the more veteran cryptocurrencies out there. However, there are two main differences between Litecoin and Bitcoin: Speed and amount. While it takes 10 minutes to create a Bitcoin block, Litecoin demands roughly 2.5 minutes to create a block – meaning 4 times the speed. Moreover, Litecoin attracts many users, as it can produce 4 times the quantity of Bitcoin! However, as Litecoin uses highly complex cryptography, often mining it is more complicated than other cryptocurrencies.
No Independent Trustee (or an immediate family member thereof) had any direct or indirect interest, the value of which exceeded $120,000, in the Advisor, the principal underwriter of the Trust, or any entity controlling, controlled by or under common control with the Advisor or the principal underwriter of the Trust (not including registered investment companies) during the two most recently completed calendar years.
* The “Fund Complex” consists of all operational registered investment companies under the 1940 Act that are advised by ProShare Advisors LLC and any registered investment companies that have an investment adviser that is an affiliated person of ProShare Advisors LLC. Investment companies that are non-operational (and therefore, not publicly offered) as of the date of this SAI are excluded from these figures.
• Inverse Correlation Risk — Since a portion of the Fund’s assets are invested in short positions in bitcoin futures contracts, the Fund will likely decline in value when the price of bitcoin futures contracts goes up (unless such losses are offset by gains in the value of the Fund’s positions in other investments), a result that is the opposite from the results of taking long positions in bitcoin futures contracts.
In addition, there may be times when the market price and the value of the Fund’s holdings vary significantly and you may pay more than the value of the Fund’s holdings when buying the Fund’s shares on the secondary market, and you may receive less than the value of the Fund’s holdings when you sell those shares. While the creation/ redemption feature is designed to make it likely that shares normally will trade close to the value of the Fund’s holdings, disruptions to creations and redemptions may result in trading prices that differ significantly from the value of the Fund’s holdings. The market price of shares, like the price of any exchange-traded security, includes a “bid-ask spread” charged by the exchange specialist, market makers or other participants that trade the particular security. In times of severe market disruption, the bid-ask spread often increases significantly. This means that shares may trade at a discount to the value of the Fund’s holdings, and the discount is likely to be greatest when the price of shares is falling fastest, which may be the time that you most want to sell your shares. The Fund’s investment results are measured based upon the daily NAV of the Fund. Investors purchasing and selling shares in the secondary market may not experience investment results consistent with those experienced by Authorized Participants creating and redeeming shares directly with the Fund.
Each Fund seeks performance that corresponds to the performance of an index. There is no guarantee or assurance that the methodology used to create any index will result in a Fund achieving high, or even positive, returns. Any index may underperform more traditional indices. In turn, the Fund could lose value while other indices or measures of market performance increase in level or performance. In addition, each Fund may be subject to the risk that an index provider may not follow its stated methodology for determining the level of the index and/or achieve the index provider’s intended performance objective.
• Active Management Risk — The performance of actively managed funds reflects, in part, the ability of ProShare Advisors to select investments and make investment decisions that are suited to achieving the Fund’s investment objective. ProShare Advisors’ judgments about the Fund’s investments may prove to be incorrect. If the investments selected and strategies employed by ProShare Advisors fail to produce the intended results, the Fund may not achieve its investment objective and could underperform other funds with a similar investment objective and/or strategies.
If you are doing any active trading, set stop losses. For any coins not in your medium or long-term holds, always set stop losses. This is important for several reasons — the most obvious is mitigating your losses. But more importantly, you force yourself to decide on a point of acceptable loss, and because you now have a reference point, you are able to measure your effectiveness to keep or adjust for future trades. Sometimes, during a market dip, altcoins can plummet, and stop losses can lead to profitability by automatically selling for fiat that you can use to re-enter at lower prices.
One traditional attraction of trading futures is the ability to use relatively small amounts of money to potentially achieve outsized returns. In many futures markets the margin, the amount of money that your broker requires up-front before executing the trade can be quite small compared to the ultimate value of the contract. For example, as of 22-Dec-2017, each E-mini S&P 500 contract was worth $134K ($50*S&P 500 index value)—this “list price” of the contract is called its notional value. The CME only requires you to maintain a minimum margin of $4.5K (3.4% of notional) to control this contract (brokers often require additional margin). Margin requirements this low are only possible because the volatility of the S&P 500 is well understood and your margin account balance is adjusted at the end of every trading day to account for the winnings or losses of the day. If your account balance falls below the margin minimum of $4.5K you’ll need to quickly add money to your account or your position will be summarily closed out by your broker. On the plus side, if you’ve predicted the S&P’s direction correctly your profits will be that same as if you completely owned the underlying stocks in the index. A +1% daily move in the S&P500 would yield $1340 in profit even though you only have $4500 invested— a 29% return—this multiplier effect is called leverage.