Christopher Giancarlo, the current chairman of the Commodities Futures Trading Commission (CFTC) has justified the decision to launch bitcoin futures by arguing it led to a price decline.
Some Wall Street actors criticized CFTC’s decision to allow bitcoin futures to be self-certified by CBOE and CME, two of the biggest futures exchanges with CME currently handling $80 million (20,000 BTC) in bitcoin futures trading volumes.
“Futures allowed for the first accessible way to speculate against the price of the asset,” Giancarlo said, further arguing:
“Economists from the San Francisco Fed noted in a 2018 economic letter that the launch of bitcoin futures products coincided with the subsequent and precipitous drop in the price of bitcoin,” emphasis his.
Giancarlo argued bitcoin’s circa 80% drop after the launch of futures is a good thing, stating in prepared remarks for the Blockchain Summit:
“I would posit that the decrease in prices has helped end a speculative bubble and perhaps allow this novel technology and asset class quieter time to continue to develop from a technological and adoption sense.”
Analysts have previously suggested bitcoin regulated futures manipulate the price, with Tom Lee, a research analyst at Fundstrat Global, stating last year:
“Bitcoin sees dramatic price changes around CBOE futures expirations… We compiled some of the data and this indeed seems to be true. Overall, bitcoin has fallen 18 percent in the 10 days prior to CBOE contract expiration.”
CBOE and CME futures have no real connection to bitcoin, with it all fiat based. While the original idea for futures was that you can lock today’s price, with the commodity or asset then delivered say in a month, there is no actual delivery of any asset in Wall Street bitcoin futures.
Instead there’s only an exchange of the price difference in dollars, with neither party needing to actually have any bitcoin.
Meaning there is no real ground to the futures price, with it having a relationship to the spot price only in a psychological manner as traders follow the herd.
Theoretically, one bitcoin can be worth one dollar in CME futures or $1 million, with the spot price staying at $4,000, because there is no “hard” supply and demand. There’s no “connection” to reality as there are with actual futures where the asset actually has to be delivered.
That makes these dollar based futures a complete fictitious trick that in many ways can detach itself from reality as there are no real supply constraints because there is no requirement for bitcoin ownership at any point of the stage.
Making these “futures” more of actual bets, not much different than the outcome of a horse race or of bitcoin’s spot price, yet both Fed and other analysts are saying futures bets somehow affect the outcome of the horse race when dollar based futures have nothing to do with real bitcoin supply and demand, thus price.