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The Chicago Mercantile Exchange (CME) launched Bitcoin futures on 17 December 2017, the same day the price of Bitcoin peaked near $20,000 and then began to crash, a crash that has lasted a year. Today, the price of Bitcoin is $3,200 and falling. The launch of the Bitcoin futures on CME and the drastic decline in Bitcoin’s price is not a coincidence. The paper Bitcoins being printed on CME and simultaneous short selling are poisoning the entire crypto space. That’s especially true since the CME Bitcoin futures are playing an increasing role in setting Bitcoin’s global price as will be explained below.
Bitcoin is supposed to have a maximum supply of 21 million Bitcoins, and this is true for actual Bitcoins, but the printing of paper Bitcoins on CME is inflating the supply of tradeable Bitcoins beyond what is actually in circulation. CME, via COMEX, is doing the same thing to the gold market. Tremendous amounts of paper gold are being printed on COMEX, as well as London OTC, leaving gold prices hopelessly supressed even though they should be rising as fiat inflation increases worldwide.
In order to understand how poisonous CME Bitcoin futures are for the crypto space, it is best to understand how COMEX has ruined the gold markets. Gold is something that is physical and must be mined from the Earth, which requires great expense and effort. However, COMEX and London OTC issues paper gold with a click of a button. An article in 2017 by Bullion Star gives great insight into this situation. London OTC has the greatest ‘gold’ volume in the world, but there is 15,000X more paper gold traded than actual gold. Worldwide in 2016, including all spot and futures exchanges, the paper to physical ratio for gold was 233:1.
The real danger comes from the fact that paper gold markets are setting the global price of physical gold. Obviously the price of paper gold is far lower than what gold should be since there is so much more paper gold than actual gold. Further, even though COMEX is by far not the biggest paper gold exchange by volume, it is the dominating force in setting global gold price since COMEX is more accessible and has extended trading hours via GLOBEX.
The Bitcoin Futures on CME are also on GLOBEX, so in effect, the same people, who have ruined the gold market’s profitability and are stealing from everyone who owns actual gold, have copied and pasted this strategy into the Bitcoin market. There is one slight adjustment that makes the Bitcoin futures even more vicious than gold futures. Holders of gold futures can receive physical delivery, but no such option exists for Bitcoin, removing any possibility that the CME Bitcoin futures can help Bitcoin’s spot demand.
Thus, Globex and CME are experts at setting global spot prices for assets, even for huge markets like gold. Bitcoiners are largely unaware of this and need to realize that a paper Bitcoin market on CME, which can print as many Bitcoins as it wants, is beginning to set the global Bitcoin price. People are looking for all sorts of reasons why Bitcoin is going down, but many fail to see the obvious influence of the CME Bitcoin futures markets.
CME Bitcoin futures have been increasing in volume in lockstep with Bitcoin’s price decline. In the below, chart each contract is equivalent to 5 Bitcoins. In Q3 2018 the trading volume of CME Bitcoin futures was 757,950 paper Bitcoins per month on average.
The Federal Reserve, the biggest bank in the world, concurs with the notion that CME Bitcoin futures have caused Bitcoin’s price decline.
“The peak price coincided with the introduction of bitcoin futures trading on the Chicago Mercantile Exchange,” The Federal Reserve said in a May 2018 letter. “The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.”
The Federal Reserve also attributes the year-long Bitcoin price decline to short selling on the Bitcoin futures market. Basically, people pessimistic about Bitcoin bet on Bitcoin going down when the futures launched. Those sentiments become reality on the spot markets because Globex sets the global Bitcoin price. This is especially true since institutional investors have practically no other options besides these paper Bitcoin futures on CME as well as similar Bitcoin futures on the Chicago Board Options Exchange (CBoE).
So how can Bitcoin and the crypto space escape the stranglehold of the CME Bitcoin futures? The Bitcoin futures and gold futures are backed by the dollar, and it will take a total collapse of the dollar to free gold and Bitcoin from this highly coordinated, top-level, worldwide market manipulation.
Essentially, it has become a war between cryptocurrency and fiat, whether Bitcoiners like it or not. The launch of CME Bitcoin futures is equivalent to a nuclear attack on the Bitcoin market, but there are other forces in play. The United States debt is approaching $22 trillion, and the government cannot afford to cut the deficit, so this debt will continue to spiral out of control, and that will cause the dollar to inevitably fail.
Bitcoin is positioned perfectly to be the primary global currency when the total collapse of fiat inevitably happens. The next major Bitcoin rally may have to wait until the dollar enters hyperinflation and collapse mode, and there will be a simultaneous major gold rally. No other Bitcoin rally in history will compare to the one that is coming when the house of paper Bitcoins, paper gold, and fiat burns down.