Bitcoin drop tied to CME futures listing, Fed paper shows

[webfact]

Bitcoin drop tied to CME futures listing, Fed paper shows

Reuters Staff

 

FILE PHOTO: Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 13, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

 

SAN FRANCISCO, May 7 (Reuters) - Bitcoin’s drop in value from its December 2017 peak of $19,511 was tied directly to the listing of futures contracts tied to the cryptocurrency’s value, new research published by the San Francisco Federal Reserve showed 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 latest edition of the regional Fed bank’s Economic Letter.

 

Fed policymakers have been dismissive, particularly in recent months, of bitcoin’s promise as an alternative currency to the dollar or other central bank-backed money. San Francisco Fed President John Williams, who will next month move to New York to run the Fed there, has been particularly critical.

 

“One of the problems they have is the values are extremely volatile,” Williams said in April of cryptocurrencies in general and bitcoin in particular.

 

Trading in futures, which sometimes reduces volatility in the underlying asset, appeared this time to aid bitcoin’s fall.

 

The introduction of the contracts on CME, one week after a much thinner trade on began rival Chicago Board Options Exchange, gave bitcoin pessimists an easy way to bet on a drop in value. This is known as short-selling in the stock market but is an integral and unremarkable aspect of futures markets.

 

As trade in downside bets picked up on CME, the authors of the Fed paper wrote, that created a broader downcycle that affected the underlying “spot” bitcoin market as well, reducing order flow and putting downward pressure on the price.

 

“With falling prices, pessimists started to make money on their bets, fueling further short selling and further downward pressure on prices,” they wrote.

 

(Reporting by Ann Saphir Editing by Chizu Nomiyama)

 

-- © Copyright Reuters 2018-05-08

 

[BuaBS]

Just like gold &  silver. Futures killed them.

[AsiaHand]

1 hour ago, BuaBS said:

Just like gold &  silver. Futures killed them.

Except gold and silver have a true value as the elements have a use. The value of cyber coins is like a pyramid or Ponzi scheme The value only goes up when some other sucker buys it in hope that a third sucker buys it .

[BuaBS]

4 hours ago, AsiaHand said:

Except gold and silver have a true value as the elements have a use. The value of cyber coins is like a pyramid or Ponzi scheme The value only goes up when some other sucker buys it in hope that a third sucker buys it .

Don't worry , there are always enough suckers .

Oh yes it it so much fun to hold Gold and silver who are dead in the water since the continuing down hammering started in Sept 2011.

Crypto's could have made us millionairs , gold & silver didn't.