Feds link crypto price fall to creation of Bitcoin futures

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The considerable price decline of cryptocurrencies like BTC in late December 2017 to early 2018 may have something to do with Bitcoin futures after all.

In an economic letter from the Federal Reserve Bank of San Francisco, the authors concluded that the fast increase and equally rapid decline in the price of BTC was definitely not a coincidence. This pattern was deemed to be consistent with typical trading behaviour which accompanied the introduction of futures markets for an asset. There was a similar occurrence when bonds were securitized in the early 2000s, according to the Federal Reserve.

“The subsequent bust was driven by the creation of instruments that allowed pessimistic investors to bet against the housing market,” the Federal Reserve wrote. “Similarly, the advent of blockchain introduced a new financial instrument, Bitcoin, which optimistic investors bid up, until the launch of Bitcoin futures allowed pessimists to enter the market, which contributed to the reversal of the Bitcoin price dynamics.”

CME Group became the second exchange behind Cboe Global Markets to list BTC futures on December 2017. This coincided with the all-time high of BTC, which reached the $20,000 mark. The introduction of futures halted the speculative demand for BTC, which was extremely one sided according to the authors of the Fed report.

Federal banking policymakers have been dismissive of cryptocurrencies, including John Williams, who is the president of the San Francisco Federal Reserve. Williams, who will be taking over the New York Federal Reserve in June, said the major problem with cryptocurrencies was that it’s “extremely volatile.”

However, the Federal Reserve believes that “transactional benefits” of Bitcoin—which offers borderless, low fee medium of exchange—will eventually move the price of the cryptocurrency forward again. It’s worth noting, however, that BTC is no longer the true “Bitcoin” as it does not scale and is expensive to transact in. Thanks to BTC Core developers’ resistance to changes, the network has been slowing down with backlogs of unconfirmed transactions that took hours to confirm and cost high fees to process.

Bitcoin Cash is the only coin that follows the original Satoshi Nakamoto white paper, offering the best scaling and security features. It reverted to the unadulterated form of the blockchain to stay true to Satoshi’s vision: replace-by-fee was removed, the signatures are preserved, transactions are kept irreversible, fees are kept low, and the block size is increased to accommodate more users and keep transaction processes fast.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

The post Feds link crypto price fall to creation of Bitcoin futures appeared first on Coingeek.

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