Bitcoin Futures Advent May Have Caused BTC’s Price Plunge – Report

Investing, News | May 7, 2018 By:

Bitcoin’s fall from a single coin price at $20,000 can be tied to the start of a futures market, according to research from the San Francisco Federal Reserve.

The report claims peak bitcoin prices coincide with the exact day the Chicago Mercantile Exchange started bitcoin futures trading, December 17, 2017.  “The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence,” said the Fed’s report. “It is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.”

Although the Chicago Board Options Exchange (CBOE) opened its futures market a week earlier, light trading there had little effect, according to the Fed.

The advent of the futures market gave cryptocurreny nay-sayers a way to back their belief that bitcoin was in a bubble. Before that, there was no formal way to bet on that belief. “So they were left to wait for their ‘I told you so’ moment,” the report said. “The launch of bitcoin futures allowed pessimists to enter the market, which contributed to the reversal of the bitcoin price dynamics.”

The report compared the bitcoin price plunge to that crisis caused by mortgage-backed securities, which also had the same optimism/pessimism dynamic.

As for the future, the Fed report said bitcoin prices would be bolstered by the advent of institutional interest in it, and by its increased use as a means of payment. However, if any cryptocurreny becomes a true rival, it could cause bitcoin’s price to again plummet, the Fed warned.