You can't prove that they don't they can only prove that they do. Proof of reserves is an absolute essential requirement going forward.
Discussion
I have really been thinking about this, and am leaning towards a 60% 40% allocation of my #BTC assets with 60% cold storage and 40% as cash settled future contracts or options.
Leave nothing on the exchanges!
Only 3 days to settle and then pull.
What is your reasoning on the future's contracts?
It’s simple leverage on a potentially parabolic asset. The 40% would have to cover any drops so you could ride out the margin calls so allocate for a short term deep price drop. There is no manipulation in the futures as they are “cash priced” based on the spot market.
I would argue that there is manipulation because the spot price is easily moved around and often is especially as it relates to the closing dates on futures contracts.
The problem with futures contracts is in my opinion that they suffer from an even higher level of manipulation.
Regardless, pulling your bitcoin off of any exchange is an absolute must.
No question! Exchanges are higher risk than options on futures based cash settled futures ETFs like BITO.
It's the same risk
Think about:
Mt Gox
Three Arrows
FTX
Basically not your keys, not your coin.
Futures contract clear by a well known clearing house have very little counter party risk.
Different risk. Exchanges holding coin have major risk that the coin does not exist and not coin is a hard asset.
How are futures funded? Since they don't buy bitcoin like spot, if the price rises and I and many others want to exit, how do they find the money?
1. Margin calls,
2. clearing houses ensure no counter party risk.
3. Contract standardization and risk exposure netting.
So a clearing house faces both the buyer and seller and guarantees contract performance of both parties.
Since no coins are delivered e.g. cash settled, the will not affect the fair market price directly.
4. You will hate this, but facts are facts… at a clearing house that is deemed systemically important by the cftc RISK is socialized.
No. 4 explains it. Gotcha.
Still, is there a law that prevents a company from compensating their friends and running out of funds for the rest of us?
Yes, selectively enforced. And yes our treasury, FED, SEC, CFTC, OFAC; all get away with illegal activities depending on the administrations agenda.
Also remember all those orgs are CIVIL only criminal is referred to the FBI and DOJ, and they have their own political stomach/agenda.
BUT ANY ONE OF THESE COULD CHOOSE TO MAKE AN EXAMPLE OUT OF YOU.