Bitcoin Futures is the Next Phase of Attack Against Cryptos
This morning’s article at Zerohedge was inevitable. After years of listening to everyone with a vested interest in the current banking system poo-poo Bitcoin and cryptocurrencies in general, the CME Group announced that they would begin trading Bitcoin futures contracts by the end of the year.
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it intends to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods.
The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. Bitcoin futures will be listed on and subject to the rules of CME.
Now we know why the SEC squashed all previous Bitcoin ETFs. It had nothing to do with liquidity, valuations or consumer protection. It had everything to do with creating synthetic bitcoins made of of dollars to be used by the big banks to dominate and control the valuation of the market.
Anyone who doesn’t believe me in saying that has never watched a minute’s worth of the gold trade.
This is how they control the gold price. They issue unlimited supply of paper gold, settled not in gold but in dollars, to keep the price in the range they believe it should be kept in over a particular period of time.
This is done to suit their needs, not the needs of the gold market participants, i.e. the mining companies, investors, end-users.
Guess what? Bitcoin futures are explicitly not going to be settled in Bitcoins. They will be settled in dollars. This means that this contract is a means by which to use unlimited dollars to control the dollar price of Bitcoin.
The SEC will issue a statement saying this will be good for tamping down volatility and “protecting investors in these unregulated and dangerous markets.”
Miscalculating Future Value
Futures trading is a natural growth path for any market to coordinate future supply and demand. It works beautifully to smooth out the prices of commodities and currencies across the world.
The CME Group is, however, not just the “world’s leading and most diverse derivatives marketplace” but the most “divisive and corrupt marketplaces” in the world today.
All markets are subject to manipulation. Since we began trading in open bazaars market manipulation techniques sprang into being. The techniques developed then are still in play today, they just get more and more sophisticated.
And when the manipulators are a protected class of bankers controlling the wealth of the society the possibility of institutionalized manipulation and fraud exists.
That’s where we are today at the CME Group and why they have been able to scalp billions from investors in the gold and silver markets through things like spoofing, leverage requirement adjustments and flat-out Fed money printing to create infinite supply in the face of finite demand.
In short? Fraud.
These things work to suppress changes in market sentiment that would cause the banks and the central banks distress when the market uncovers they are vulnerable and the price of the dollar or oil or corn drops. And by doing this they extend existing trends far longer than they would in a free market and ensure a later collapse in confidence orders of magnitude bigger than it would have been had they just let the market operate and take their lumps along the way.
The Bitcoin Mutation
Bitcoin was, in my mind, the catastrophic mutation of money brought on by extreme levels of monetary corruption in the modern banking system. It was designed to fix the problems of gold in a global market while retaining all of gold’s other excellent monetary properties.
It operating completely outside the regulated money markets made it the perfect test bed for a new open-source monetary system and economy. It’s still in that test-bed phase because of inertia, regulatory structures designed to inhibit its growth as a medium-of-exchange and the lack of tools to make it easy to use for the average middle-class person.
That last bit is on developers to address, and they are.
Now, like the good little oligarchs that they are, they’re finally scared enough of Bitcoin and cryptocurrencies that they are going to cap their growth through good ol’ fashioned leverage and market manipulation.
Everything else has failed to stem the tide so now it’s time for this battle tactic to be employed.
Understand that from an evolutionary biology perspective Bitcoin is a mutation which rises to the level of existential threat to central-bank-issued debt-based currency. Gold was put on the futures exchange when they finally realized they could do a better job controlling its price and the perception of the dollar’s strength better than refusing to allow a futures market for it at all.
Bitcoin is getting that same treatment.
The Real Battle for Bitcoin
We’re heading into the period of uncertainty surrounding Segwit2x and the potential for a destructive bout of infighting that will change the future of Bitcoin forever. I have to wonder if this announcement and CME’s expectation of trading to commence before year-end are connected.
Fomenting this fight for the future of the Bitcoin blockchain and then spinning up a futures contract designed to control Bitcoin’s price is the real attempt to kill it once and for all.
Because if Bitcoin is to cryptocurrencies what Gold is to the dollar reserve standard then controlling Bitcoin’s value, the thinking goes, should control the value of all the cryptocurrencies.
They can then prick this bubble, dishearten a lot of latecomers to the 2017 crypto-party and steal billions in wealth all at the same time. That would be quite a kill shot, wouldn’t it?
On the other hand, if the cryptocurrency ecosystem is as resilient as a true decentralized system should be, then attacking one node of the cryptocurrency network shouldn’t mean very much in the end.
Bitcoin is Dead, Long Live Bitcoin.
And the capital that has been deployed in the crypto-space will route itself around Bitcoin, itself now almost an anachronism of legacy, outdated code desperately trying to remain relevant, and flow into the coins that have real promise to change the way we do business on the Internet.
Will we see something else become the new crypto-reserve standard? Or will we see a massive leveling of capital across the space?
Either way, this announcement by the CME Group is not to be taken lightly. It is the most important crypto-headline of 2017, in fact. Be prepared for anything.
Nah
Just like they've been hammering, manipulating and suppressing gold and silver since 2009, the CME will also hammer and suppress bitcoin. I've always been warning that things will turn ugly since Wallstreet and Goldman have been digging their claws into bitcoin, and this CME announcement is the first step on their agenda. Prepare for the real bloodbath.
It's a long way to freedom but cryptos are a first step to get a little more independent from those banksters. Let the battle begin!
Whether we like it or not, banksters have the means and the will to do whatever is necessary to defend their turf. They've had the power to spark wars and destroy countries for centuries, our modern times are an illustration of their craft. They will do the same with cryptos. We should not underestimate them under the guise and comfort of decentralization. They will centralize cryptos one way or another, with new laws, more control, exchange shutdowns, etc.
Unfortunately there's nothing to deny on that. Everything that's happening is in the end based on money and those having control over it can do whatever they like... Cryptos aren't dangerous to their system yet but they already start killing it before it booms. Take a look at China, banning it all, creating its own crypto to keep full control...
Russia too is planning on creating its own crypto.
Absolutely this is their plan and hence the point of the article. But, that's why we need to be prepared to fight that much harder and find new ways to get around their control mechanisms
For me, I feel that decentralized exchanges and social media platforms are the key to taking this fight on. The free flow of information as well as the ability to keep capital out of their control are important pillars of resistance.
In my view, bitcoin is getting too much attention that eventually it will be a victim of its own success. Perhaps altcoins might stand a better chance because they are numerous and fly lower under the radar?
In effect that's what I'm alluding to at the end of the article. The central bankers see Bitcoin as the fulcrum for control. But will that work? For a short time yes, but the market should adapt to it and shift away from the manipulated market for the unmanipulated ones.
The truth is that $180 billion is not a lot of money compared to the trillions in the forex markets that move daily... of course, a lot of those assets are deflating while cryptos are inflating in price, so we'll see how things shake out.
Very nice read and thanks for your thoughts...in my opinion this announcement by th CME Group is probably a good signal that investments in Bitcoin are becoming legal to trade and will be supported by the broader markets. Anyhow I think it is rather complicated to for an investor to use the advantages of Bitcoins when he is just holding a future contract. I think investors want to hold the real deal and use Bitcoin for what it is and a future contract would be just purely price speculation. Therefore there should be a premium to be paid on the real Bitcoin that private investors hold in there wallet.
You are welcome. I welcome futures markets, just not futures markets run by the rotten CME Group. In fact, this is something that the crypto-community needs to get working on now, fully settled futures in cryptos of all forms backed by a smart contract.
Talk about a job that Ethereum developers SHOULD BE WORKING ON.
But what if I want to buy a futures contract, and mark it for delivery?
... oh yeah, they will just give me some paper dollars and tell me better luck next time.
What if some investors come out and say that CME only has enough bitcoin to honor 1% of their contracts, and tell everyone it is a scam?
... the media pundits will poo-poo the idea as conspiracy theory nut-job trying to crash the market, fear salesmen.
The Announcement says explicity, these contracts will be settled in cash, not bitcoins.
"At first they ignore you, then they laugh at you, then they fight you... Then you win."
Curated for #informationwar (by @openparadigm)
Relevance:Market Manipulation
Ahhh I wouldn’t worry about it.. I mean if they could print trillions they could just ad well buy all of the bitcoins on exchanges.
Well, that's news all right! I will certainly be keeping my eyes on this development, thanks for the informative post.
Sounds a touch paranoid. I believe the opposite, this is the first step to the big money pools beginning to feel comfortable enough to dive in head first, and drive BTC to $10K
Just remember It's a 'cash settled' contract. And I'm not paranoid, this is exactly what they've been doing in the precious metals markets for over a decade.
I understand that this will bring 'legitimate' money into the futures market that is not allowed to now and that will likely assist a big move up probably towards Clif High's numbers of $13800 or so, but after that the futures market becomes the market and the underlying no longer matters.
This is true in gold, silver, oil, corn, soybeans etc. But, unlike those markets, the CME Group isn't even trying to hide the fact that they want control of it because they are going to offer futures without having a stake in the underlying.
No one has to put up bitcoins to take the short side. Therefore this isn't a real futures market but rather a casino of synthetic dollar-denominated shorts against bitcoin.
Understood. Far from perfect end state. Cash settled sets up space for manipulation.
But this is also a step to bringing "legitimate" money in, which as you admit is likely to cause a decent price increase.
My assumption is that as BTC becomes more mainstream, and the big pools are allowed to buy in with the underlying asset directly, then the futures market is going to have a challenge in trying to limit the price increase.
There will enough momentum in some of the buying and price increase for underlying BTC that futures won't be able to control. Like a tidal wave. The natural power will be overwhelming.
I could be wrong. Just sharing an opinion.
And so can I. I hope that you're right Dave. What I really hope is that the crypto-market sees this for what it is and builds a true futures market, settled in the underlying asset, for all cryptos, neatly bypassing these guys.
There's tremendous money sitting on the sidelines looking for a legal way to get into this space...on that we agree. And in the first phase of it building a legal framework is absolutely necessary to let that money in.
The Russians are going about it the right way. We are still dragging our feet and only putting in place those things that attempt to gain control. This is why the Segwit2x fight in Bitcoin is so interesting.
Original vision vs. access to easier growth but more control lies at the heart of it.
Cryptocurrency is just the latest incarnation following in the footsteps of the Arms Race, the Space Race and the Peace Race.
Sadly, I think it'll be the West that builds some kind of economic Doomsday Device.
The rest of us will just have to stay on our toes and move our crypto around in order to protect it. That's the beauty of it, you can create another one quickly to replace the one the elites just took down.