CEM is a name that greatly affects the value of Bitcoin but not everyone knows what CEM is, how it affects bitcoin. So in the article below, Virtual money blog will share your knowledge about What is CEM? Its influence on Bitcoin? Stay tuned
What is CEM?
CME stands for phrase Chicago Mercantile Exchange Chicago Commodity Exchange, is a Chicago-based nonprofit company that provides locations and spaces for futures transactions. Simultaneously participate in monitoring the implementation of commercial rules, collecting and disseminating information about the market and ensuring the operation of the clearing and settlement mechanism.
CME floor provide a platform for future transactions, allowing investors to buy commodities at predetermined prices. For example, in the aviation industry, oil is a very important commodity. However, oil is also a material whose prices fluctuate continuously. And for an airline, it is important to estimate the cost of raw materials, to be able to calculate the cost and provide an appropriate price for air tickets. Of course, firms can buy oil for storage, but there will be technical problems and cost issues. For CME exchange, this concern can completely change. CME allows airlines to pre-purchase oil at a set price, and without taking products immediately. Oil will be delivered when needed.
The influence of CME on Bitcoin
When CME announced its support for Bitcoin, other financial institutions, such as pension fund management, also considered investing in the crypto market. With the way it works, CME is always confident to help individual and institutional clients manage the risks of investing.
CME announced it would integrate Bitcoin into its portfolio in December 12. And the exchange claims to tame Bitcoin in many ways, issuing laws and controlling its price movements. By the time CME accepted Bitcoin as a name representing a new generation of assets rather than a currency around December 2017, the value of the virtual Bitcoin currency increased from $ 12 to $ more than USD 2017, with the highest time of nearly USD 6000, is the golden time of this cryptocurrency. It will also mark Bitcoin's bearish cycle when launching Bitcoin futures.
When discussing Bitcoin price or the price of a currency, it is useful to separate trading needs (arising from the use of bitcoin in transactions such as buying goods and services) from speculative demand (arising when people buy bitcoins in the hope that their value will increase). Speculative demand is essentially a bet that the prices of underlying assets or currencies are increasing. For most currencies and assets, investors have ways to bet on increasing or decreasing their value by using a variety of financial instruments based on assets or currencies, called financial derivatives.
Before December 12, there was no market for bitcoin derivatives. This means that it is extremely difficult, if not impossible, to bet on the decline in the price of bitcoin. Such bets usually take the form of short selling. Speculative demand for Bitcoin At that time, only from optimists, investors are willing to bet that the price will rise. The demand of optimists pushes the price of bitcoin up, adds momentum to many participants, and keeps pushing prices up. Pessimists can't bet money on their belief that the bitcoin price will crash.
And this one-sided speculative demand ended when bitcoin futures began trading on CME on December 17, 12. With the advent of bitcoin futures, pessimists can bet on a decline in bitcoin. If investors think that bitcoin is in a bad period, they can bet a discount on the currency. With the offering of bitcoin futures at lower prices, this would certainly put downward pressure on the spot market.
For all investors who are present in the market to buy bitcoin for trading or speculative reasons, this is a good thing. New investment opportunities have led to a drop in demand in the spot bitcoin market and thus to a price drop. With the price dropping, pessimists start making money on their bets, prompting short sales and continue to bet on the discount. And that makes the price of Bitcoin from the end of December 12 to the present in March 2017, the price of Bitcoin dropped continuously, from the peak of nearly 3 USD to over 2019 USD.
Since there is no actual asset that can compensate for the value of bitcoin and it does not provide a natural barrier nor a guarantee against the drastic effects of other assets, the last thing that determines the price The basic value of bitcoin is transaction needs. We all know that bitcoin is used as a medium of exchange in some markets. The amount of bitcoins needed for these markets constitutes transactional demand. Bitcoin's supply growth is becoming more limited as mining prices rise. If transaction demand increases faster than supply, the price will increase.
Transactional needs depend on a number of factors. For example, the availability of alternative products. If another cryptocurrency is more widely used as a medium of exchange in markets currently dominated by bitcoin, then the demand for bitcoin could drop significantly. Or if traditional financial institutions are willing to accept bitcoin as collateral, a means of payment, or a direct investment, the demand could increase significantly. Ultimately, official recognition and acceptance of bitcoin as a payment method will increase its circulation activity, while the constraints on managing or adding transaction fees may reduce the price of Bitcoin.
Above is the article "What is CME? Things to know about the influence of CME on BitcoinHopefully, in the article, you will have more useful knowledge about CME, as well as the influence of CME exchange on the price of Bitcoin.
If you find our article useful, please share it with your friends, and do not forget to leave comments via the comment feature below! Good luck!