Bitcoin Traders Will Create a Perfect Opportunity... in Gold

Liftoff: Bitcoin futures are up and trading.

Given the huge buzz around the cryptocurrency, its first day was surprisingly tame - at least by Bitcoin standards.

Futures rocketed 20% at open before dropping back beneath $18,000. That's still nicely above the $16,649 mark Bitcoin was sitting at midday yesterday, but you've got to remember, Bitcoin's up more than 66% since Dec. 1. Reuters' "Breakingviews" noted futures volume was around $50 million, just 0.5% of the volume of actual bitcoins in the prior 24 hours.

Now, it's possible lots of would-be traders were sitting out the first day, pulling a "wait-and-see" on possible expensive glitches.

But then again, the first day doesn't matter much. I think Bitcoin futures will be big - much bigger than they are now.

I'm not trading just yet. It's a little dangerous for my taste, but I will eventually.

And I'm going to do it in this very specific, high-profit way that I'm going to show you right now.

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How Bitcoin Could Bring Us the Biggest Gold Play Ever Made

Here's how I'll play the game...

If the futures market is trustworthy, I'll play there. I won't buy Bitcoin, ever, because I don't trust it. If I buy Bitcoin and the price collapses, I may never be able to sell them at any reasonable price, or at all.

THEY CALL HIM "THE NIGHT TRADER"... and he's already up to 929% in total gains. You have to see this...

Just saying.

bitcoinHowever, I'll put up 30% margin at the CBOE or 35% margin at the CME and trade the futures, even though I know there's no guarantee I'll be safe playing there.

You see, there I might be able to get out using stop orders, or get out after halts, or maybe not get out and just watch my trades make me a fortune.

Based on how high Bitcoin has moved, I'd be tempted to buy futures. But based on the potential for disaster in terms of trading halts and price discrepancies in the cash market, I'd be tempted to short futures and bet on a price collapse.

I'd rather play Bitcoin both ways, and I can do that by buying straddles in the Bitcoin options market. I'll tell you how to do that next week.

So, what's Bitcoin got to do with gold?

Nothing much, to start off with. There's no correlation.

However, one's going to develop. In a major way.

Here's How Gold Comes Roaring Back at Us

What's going to happen if Bitcoin keeps rising and creating positive futures trading, allowing traders and investors to be more prudent in their position-taking, is that gold will probably drift lower.

Gold might even test $1,100 or $1,000... momentarily.

Calm trading in a rising Bitcoin would elicit more commentary and build perceptions about how Bitcoin is a store of value, and how it's more profitable to hold than gold.

At that point, if there are any global crises ahead, Bitcoin will be where investors flee to.

That's the kind of chatter that surrounds Bitcoin already - and one reason gold's been drifting lower.

I'm a contrarian when it comes to Bitcoin; I don't believe any of the hype about Bitcoin, other than that it's based on blockchain - a technology I like - and it's a speculative trading instrument (not an asset class).

If you're like me, and you see gold falling against a rising Bitcoin, there's a smart trade waiting for you.

bitcoin goldI'm watching gold and gold mining stocks. If Bitcoin keeps rising and gold keeps dropping, I'll be looking to buy gold and gold miners as they drift lower.

Why? Because by the time the Bitcoin dam breaks (and it will break), gold will be incredibly cheap and gold miners insanely oversold...

The flight to quality, into the real store of value, into the age-old "alternative currency," into a real asset class, into gold, will be nothing short of spectacular.

Keep those seatbacks in their upright position and your tray tables stowed.

The Bitcoin futures launch may have a hard landing, and gold, sitting on the opposite runway, is waiting for clearance.

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Since April 28, Shah's Zenith Trading Circle subscribers have had the opportunity to make average gains of 44% per day (including partial closeouts). His track record must be seen to be believed. Click here to learn more...

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About the Author

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

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