Christopher Giancarlo, chair of the Commodities Futures Trading Commission (CFTC) until last April, has stated the Trump administration believed bitcoin futures would crash the price by allowing “institutional money” to bet against it without owning bitcoin.
“If you do believe it’s a ridiculous price but you don’t own, there’s no way to express that view,” Giancarlo said, adding:
“One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of popping the bitcoin bubble. And it worked…
At the leadership level I communicated with Treasury Secretary [Steven] Mnuchin and NEC Director Gary Cohn, and we believed that, should bitcoin futures go forward, it would allow institutional money to bring discipline to the value of the cash market.”
This remarkable admission comes after it has become clear bitcoin futures manipulate the price mainly downwards with bitcoin falling like clockwork just before futures expire on the last Friday of the month.
Unlike actual futures where you agree a fixed price today for delivery in say a month, the CME futures do not lock the price, nor is anything actually delivered.
Instead bankers can bet on bitcoin’s price fall without owning bitcoin and without touching bitcoin at all.
Since such futures have nothing to do with bitcoin, you’d think they wouldn’t affect its price either, so why did the Trump administration believe they would crash the price?
Giancarlo doesn’t quite say, but CME is designed in a way that can easily be manipulated due to the use of only a one hour window when because of sophisticated detection methods price can’t be manipulated, yet during the other 23 hours “institutional money” can somewhat easily move the price on bitcoin exchanges.
That opens the way to short on CME, then market sell bitcoin within four minutes in such a way as to have a mini crash of the price.
That this is legal is very curious because it isn’t quite clear what purpose these futures serve as there is no growth of bitcoin produce like there would be with farmers stock, and there is no difficulty in actual delivery like there would be with gold.
CME for example does not have futures for Apple stocks because you can buy and sell the stock itself, unlike sheep or gold which might not be as easy to buy and sell in an actual possession way.
So such futures arguably only serve the purpose of manipulating the price, something seemingly intended at the level of the Treasury Secretary itself.
However, whether that’s a temporary effect due to bitcoin’s own design is unclear, but what is clear is that regulators colluding to manipulate market prices by allowing fake futures and not an actual bitcoin ETF, suggests that swampy thing is not going very well for Mr Trump.