I was watching the very first CBOE Bitcoin futures (ticker GXBT) which settled 1/19/18. I found it fascinating that the futures settlement was dependent on such little liquidity--the 4 pm ET Gemini futures auction, for which data is available here:
https://gemini.com/auction-data/?filter=4PM-BTC-USD#auctionData
There were 616 BTC traded in the Gemini auction, which is $6.7 million USD notional value.
As of 1/16/18 (day prior to expiry), there were 1966 open January 17 GXBT bitcoin contracts equal to exposure to 1966 BTC. Call it ~$20 million of exposure. The max position size anyone can hold into expiry is 1,000 BTC worth of contracts.
The whole idea is that someone can initiate a large futures position on the day of expiry and then make a big bitcoin purchase. Since futures trade closes out automatically and cash is delivered to the big futures holder, they end up with some extra profit.
Here's the mechanics of how it could be done:
- Initiate 1000 contract long position on the Gemini bitcoin contracts on day of expiration. If BTC is at $11K/USD, this costs you only $500K for $1.1 million worth of exposure due to inherent leverage.
- Buy 1000 BTC at the Gemini 4 PM auction.
So this begs the question: Will the CBOE's XBT futures always rise into the close on expiration? This manipulation is illegal, but you do wonder if we will start to see something like this happen.