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BitCoin Gets a Futures Market
fireballrus writes "There is one more way to use your BitCoins rather than buying weed or socks. Recently, a Bitcoin Exchange called ICBIT quietly introduced a futures market, obviously using Bitcoins as its main currency. Gold futures trade roughly at 137 BTC/tr.oz and Sweet Crude Oil at 7.3 BTC/bbl. This may play a positive role in the Bitcoin economy which needs more ways to actually use coins instead of mining them." While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
I've never understood the vitriol heaped on BitCoins in this forum. None of the stated reasons for "It'll never work" seem to hold under examination.
1) It's not based on anything
Well, neither are any of the major currencies, especially the dollar. The Euro is teetering on the brink of disaster, the Fed has been spraying money with a firehose, numerous South American currencies have gone bust - I just don't see any difference. ...except, that bitcoins are immune to *some* of the problems typically found in national currencies.
2) No one is using them
There was a time when no one used the internet, either, and look how big that got.
I'm not sure there is a point here - lots of things didn't get big and no one uses them (pets.com, anyone?), and lots of things got big and *everyone uses* them (google.com).
If you're saying that not enough people will *ever* use them, so that the idea won't take off, then that's an opinion. A lot of people are predicting success, so why are they wrong and you right?
3) It's a scam
All of the scams reported so far have been, effectively, companies trying to be a bank without banking regulation.
It's not a problem for BitCoin if someone convinces you to deposit your coins in their bank and then loses them, any more than it's a problem for US currency if someone convinces you to give them your money and loses it. People get scammed all the time, but it's not the fault of the currency.
Again, I don't see the difference. BitCoins are like money, and can be stolen like money. Why is having money any different?
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BitCoins doesn't solve all the problems of money, but it does solve a fair number of them. Logic and reason would seem to indicate that this is a better way to do currency.
I must be missing something.
Can one of the economists explain why it won't work?
I mean, explain it without appealing to emotion and irrational fear. Like, by using logic and evidence.
While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
I'll give you a positive and a negative.
Positive - This make sense because "futures" relate back to the (expected) scarcity and surplus of real-world material goods, the availability of which has no connection to the value of the Euro vs the Yuan. It would make more sense to hedge crude in terms of soybeans than in dollars, yet we only really have the option of doing it in dollars.
Negative - Bitcoin lacks even the connection to reality that Dollars have by virtue of the latter's use in trade for otherwise-real-world products and services.
Now, you could take that in two ways - Connecting Bitcoin to commodities may make it more "meaningful" than most government-issued currencies, because it can float against the rest of the world's currencies to maintain an accurate reflection of the reality underlying production, rather than some random economic policy put in place by a central bank. On the flip side of that, you currently can't actually take delivery of 50 tons of pork denominated in Bitcoins, so this looks like a "futures" market in the worst speculative sense, without the faintest connection to the underlying commodities.