Well, Well Well! Just like the rock song “Video Killed the Radio Star” (Buggies….1980) have futures killed the “Bitcoin star”? When the CME Group and the Cboe introduced bitcoin futures back late last year bitcoin was rocking and rolling close to $20K and volatility was……..just insane. So, is there a correlation with the advent of futures and the collapse of bitcoin? Have futures made the crypto market more efficient and dampened the volatility? Or, was that spike to $20K just over excitement and the introduction of futures just coincidental? More likely is the fact that the bitcoin market was just not liquid (mature) enough at the time futures came on and when the futures got a lot of sellers (hedgers) they vastly overwhelmed the underlying bitcoin buyers. And, apparently still do.
(Historical note; when the Cboe introduced options–calls only–volatility was awesome. Puts came on, dampened volatility and made the markets more efficient. S&P futures entered the mix and the markets, with various strategies, became more liquid and efficient. Bitcoin will encounter the same curve).
So, have futures had a negative effect? Certainly for now but not forever.
Oh, in case you are curious:
Bill Taylor/Managing Editor
“Late last year, the cryptocurrency community highly anticipated a surge in bitcoin price after the launch of the bitcoin futures market operated by the Chicago Board Options Exchange (Cboe) and CME Group, two of the largest options exchanges in the global market.
Almost immediately after the entrance of Cboe and CME Group in the cryptocurrency market, the price of bitcoin started to surge rapidly. Within weeks, the price of bitcoin peaked at $19,000, surpassing $24,000 in South Korea.
But, as it did on the upward movement, the price of bitcoin fell quickly from its peak at $19,000 to $6,000, experiencing the third worst correction in its history with a 72 percent decline from its all-time high. Currently, the price of bitcoin remains at $7,400, the price of bitcoin in early November.
The January correction of bitcoin has been brutal, and it sank the entire market with it. More or less, most cryptocurrencies in the market followed the price trend of bitcoin over the past few months and bitcoin has actually outperformed most cryptocurrencies in the market throughout 2018.
Cboe and CME launched their bitcoin futures market in the first week of December. Prior to the launch, CME chairman Leo Melamed confirmed the plans of CME to launch its bitcoin futures market as early as November. On November 7, as CCN reported, Melamed stated:
“That’s a very important step for bitcoin’s history…We will regulate, make bitcoin not wild, nor wilder. We’ll tame it into a regular type instrument of trade with rules…”