I am very confused by the CME's listing Bitcoin, especially to be cash settled at the end of the day. I have several questions, perhaps somebody can help me? First, in any futures contract, somebody has to take the opposite side of the deal. So, who is going to take the short position?

I can't imagine anybody with a brain deciding to take the short position? I mean seriously, the float on Bitcoin is much, much lower than everybody on Wall Street thinks it is. It is probably even lower than the Bitcoin Community thinks. With a market cap of approximately $100 Billion, couldn't any average Billionaire or Bank just purchase long contracts and then if the market doesn't go their way right away, all they would have to do is set up accounts at all the major exchanges and just start buying everything across the board.

They could easily buy $5-10 Billion in Bitcoin and it would go lock limit up for months and months? And that number is way over kill. I would imagine with $100M- $1 Billion, systematically placed, people would see the price go up and BTC owners would spot it right away and not sell their coins for any reasonable price?

The could also flood just a few exchanges and suck up all the supply and then do nothing on the other exchanges and just wait for huge arbitrage opportunities.

In other words, I just don't see how anybody would take the other side of those long contracts. In order for somebody to take a huge short position, they would have to have an enormous amount of BTC already in their control and then when the big dawgs do a short squeeze, they would have to defend their position by dumping mass amounts of BTC on the open market to hold prices down. However, I just don't think that anybody/entity has enough BTC to adequately defend their position and they will quickly get stopped out and lose everything.

Is there something I am missing? This seems like a complete no-brainer as far as I can see. It is not going to be easy to manipulate the BTC market to artificially hold down the price, like in silver and gold. JP Morgan can easily naked short to infinity and so far there hasn't been any players big enough, or with high enough risk tolerance to squeeze the naked shorts. The only thing that keeps those markets functioning at all is because the risk of somebody with big enough balls that may just take a long position and demand delivery, which almost certainly would not be possible.

Now with the Bitcoin market, we know for certain that the risk of forced delivery is off the table, as it is a cash settled market.

So in my view, it would be complete suicide to take a short position because any medium size player could team up with couple of people and purchase 70-90 percent of the float and watch the prices skyrocket.

I know these big banks and hedge fund traders are much brighter than I am, so I can't believe that I figured this out before they did, so if they are aware of this, how are they going to make a profit? What is their model?

I suspect that this could be the shortest contract the CME has ever had. Unless somebody can explain to me where my logic is faulty, the CME will discontinue trading this contract within 60 days as there really won't be a market if you don't have sellers?

What do you guys think?