Bitcoin: All Professional Investors and Traders Knew That…

Bitcoin: All Professional Investors and Traders Knew That…

Bitcoin: All Professional Investors and Traders Knew That…

$BTCUSD, $CBOE, $CME

…the launch of Bitcoin futures would cause the price to fall.

A Fed paper has attested to that as;

  • Bitcoin’s drop following its peak near $20,000 was directly tied to the launch of a futures market, according to new research from the San Francisco Federal Reserve.
  • “The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence,” 4 researchers say in the regional Fed bank’s recent Economic Letter.
  • The cryptocurrency’s highest price lines up with the day the Chicago Merc, or CME, introduced Bitcoin futures trading.
Bitcoin’s Fibo retracement following a rise to nearly $20,000 was directly tied to the launch of a futures market, according to research from the San Francisco Federal Reserve published Monday.

“The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence,” four researchers wrote in the regional Fed bank’s most recent Economic Letter. “It is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.”

Bitcoin Meets LaSalle Street

The Top Bitcoin prices lined up with the day the Chicago Merc (CME), introduced Bitcoin futures trading on 17 December 2017.

That same day, Bitcoin hit a high of $19,783, according to data from CoinDesk. The Chicago Board Options exchange, or CBOE, also opened a futures market a week earlier, but trading there was thin, the letter said.

Bitcoin’s 12-month performance

Source: CoinDesk

Until futures came on it was not impossible to bet on the decline of Bitcoin prices, the researchers said.

The Optimists continued to bid up, the cryptocurrency rose more than 1,300% in Y 2017.

The Pessimists had no financial way to back a belief that the Bitcoin price would collapse.

“So they were left to wait for their ‘I told you so’ moment,” the Fed researchers said. “The launch of Bitcoin futures allowed Pessimists to enter the market, which contributed to the reversal of the Bitcoin price dynamics.”

Currently, Bitcoin is trading at: 9,372.125,+41.6104, or +0.45%, as of 6:38a BST, the market is open.

The researchers compared this price reaction to mortgage-backed securities, which they said hinged on the same driving force of Optimistic and Pessimistic players.

As for why it was a gradual fall rather than an overnight collapse, researchers said it could be a lack of attention or willingness to enter the market on the 1st week of trading.

Future prices and demand could be helped by any traditional financial institutions becoming more willing to accept Bitcoin, and official recognition and regulatory acceptance of Bitcoin as a means of payments, they wrote.

But a competing cryptocurrency becoming more widely used could cause Bitcoin to “drop precipitously because these tend to be winner-takes-all markets,” Fed researchers said.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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