If you were around in the cryptocurrency community during December 2017, you likely remember the craze that existed in this market. Back then, everyone and their mother was talking about Bitcoin; you literally couldn’t get away from the conversations about blockchains or the latest “hot” altcoin.
But as quick as Bitcoin blew up, the cryptocurrency collapsed, tanking under $17,000, then $15,000, then $10,000, and so on and so forth all within the span of a few months.
This came as a surprise to many. Near the top of the bubble, the Chicago Mercantile Group (CME) revealed that it would be releasing a regulated Bitcoin futures market, leading to vast speculation that BTC was going to rocket even higher than it already had.
Of course, this wasn’t the case, with the cryptocurrency market actually crashing in the wake of the launch.
While some say that it was simply an overextension of the market that crashed Bitcoin, an industry expert, who has been working in Bitcoin for over five years now, has proposed that ironically it was the CME futures that contributed to the decline.
CME Bitcoin Futures Crashed Bitcoin?
Speaking to popular industry content creator Ivan on Tech, renowned Bitcoin educator Andreas Antonopoulos, said that the CME futures market likely has much to do with the decline in the price of BTC over the past two years:
“We know for a fact that when the Bitcoin bubble started to go up really fast in 2017, the U.S. Treasury decided to fast-track the deployments of futures markets in order to stop that bubble.”
Antonopoulos’ statement was made seemingly in reference to the idea held by precious metal traders that gold, by way of futures and other financial derivatives, is being suppressed by Wall Street investment activity.
This isn’t only a theory. Former Commodities and Futures Trading Commission chairman Christopher Giancarlo said in an interview with CoinDesk that it was the “CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn,” that popped the Bitcoin bubble by allowing for Bitcoin futures to be launched. He elaborated, stating, “We saw a bubble building and we thought the best way to address it was to allow the market to interact with it.”
Also, the San Francisco branch of the Federal Reserve came out with an extensive report on the Bitcoin market in 2018, following the top of the bubble that catapulted BTC to $20,000. In that report, the regional branch of the U.S.’ monetary authority said in the report that “The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.”
While Antonopoulos and other industry analysts are sure that the CME’s futures are depressing the price of Bitcoin, there’s hope on the horizon for this suppression to be mitigated. This hope has taken the form of Bakkt’s Bitcoin futures contract, which is physically-settled compared to the CME’s cash settlement. That means that Bakkt futures holders are actually entitled to the “physical” Bitcoin that back the contracts, unlike the CME’s contracts, where the BTC bought on the futures market don’t actually exist on-chain.
As PlanB said in a September installment of “The Investor’s Podcast” with Preston Pysh: “you could theoretically sell more than 21 million Bitcoin [through the CME’s futures], even if there isn’t 21 million Bitcoin [on chain]. … You would need a lot of cash, but you could do it, especially with the backdrop of government having access to printing presses.”
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