Expectations are rather more mixed than that.[0] Sure, the price could spike even higher after futures go on sale. But volatility will increase dramatically. And you can't count on exchanges, if the price collapses.
Can you do an "Explain it like I'm 5" of this? I don't doubt you but I'm struggling to make the connection. Will futures affect the pricing of the underlying asset? (I don't think so?)
I think you are saying "futures reduce volatility for the trader" but I'm not sure.
More specifically, it allows one to short with limited downside. There are some exchanges that provide naked short positions in Bitcoin, but those have theoretic infinite downside and your broker will force you to liquidate at a loss at a certain point.
With futures, however, you can put together positions that will provide a known limit on your downside for short positions. This provides a more appealing avenue for shorts to get in with much less risk.
I am not sure I get how the risk is limited with a future. If the price goes to $1m when you traded at $16,000, you will have to make a $984,000 margin call payment (+margin).
It helps price in future price shocks, and adds liquidity, which has a known dampening effect on volatility.
With respect to the latter, my own personal theory for why this is is that more liquidity means more individuals actively trading the asset, and that translates to more non-correlating factors affecting the price. This makes it less likely that a shock somewhere in the economy will have a significant impact on the price.
Modern economic scholarship properly offers a better explanation.
Also the CME & CBOE bitcoin contracts like many other futures commodities allow "spread" trading across duration. This has a dampening affect as well. In a lot of commodities spread trading volume exceeds that of the outright.
As I understand it, that's true only if there's a balance of buy-side and sell-side hedgers. Owners and miners are sell-side hedgers. Who are the buy-side hedgers?
And that volatility should make this asset class (if it is one) unsuitable to trade for most banks and many institutional investors, who have VaR limits. The VaR of bitcoin is off the charts.
0) https://www.coindesk.com/bitcoin-futures-make-way-new-kind-w...