Futures market contributed to Bitcoin’s drop-in value last December

08 May, 2018
by Ryan McInally
 Futures market contributed to Bitcoin’s drop-in value last December

Bitcoin saw a significant drop in value from its high in December 2017 of $19,511 to less than $6000 on February 6, 2018. According to new research by the San Francisco Federal Reserve futures were a contributing factor to the price decrease. 

In an economic letter by four researchers who work at the Fed’s bank, “the rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence,”. John Williams, the San Francisco Fed President has been particularly critical of Bitcoin’s intention to become a widely adopted alternative form of currency. William’s cited the volatility as one of the coins major issues.

Trading in futures can reduce volatility in the underlying asset as a person is taking a position on whether they think its value will increase or decrease and not investing in the actual asset or coin, which contributed to the significant fall in value. The introduction of futures on the CME gave pessimists a way to make money as the price began to slip.

As Bitcoin began to lose money “with falling prices, pessimists started to make money on their bets, fueling further short selling and further downward pressure on prices” according to the letter by the San Francisco Federal Reserve. The price of Bitcoin is currently slightly above $9400, which is on 7-day increase of 3.58%. However, several days ago prices came extremely close to hitting $10,000 for 1 BTC but ultimately scaled back several hundred US dollars per coin. Some twitter users believe that the futures market is still "pumping and dumping the market right now"

Other twitter users were able to identify the effects of the futures market had on prices several months ago 

Read more about: Bitcoin (BTC)


did you think the futures had something to do with the price crash in december?

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