Bitcoin will face its stiffest test with the advent of futures trading controlled by the CME Group.
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.
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The sanctions imposed on Russia backfired terribly: the Russian financial judokas used the sanction regime to speed up productive development in Russia at a rate that sees it years ahead of where it would have been without the exacerbating sanctions.
See: What does Russia produce?
#1 http://thesaker.is/what-does-russia-produce-1/
#2 http://thesaker.is/what-does-russia-produce-2/
#3 http://thesaker.is/what-does-russia-produce-3/
#4 http://thesaker.is/made-in-russia-sitrep-iv/
#5 http://thesaker.is/made-in-russia-v-sitrep/
#6 http://thesaker.is/made-in-russia-vi-sitrep/
#7 http://thesaker.is/made-in-russia-vii-september-1-15-2017/
#8 http://thesaker.is/made-in-russia-viii/
Could that happen with the development of the crypto realm? Does Russia have the incentive and the leadership to innovate in this field as it did with regard to the sanctions? Unquestionably IMHO, it does. The stakes are very high as this blog has already noted. The analogy to sanctions is a good fit. The game is on.
This post becomes even more relevant given your recent postings about what’s happening with Bitcoin futures and the coordinated attacks on the price of Bitcoin. From this post, it seems you are saying Bitcoin could be doomed, but other cryptos can take over where Bitcoin falls? If so, which cryptos are those? Maybe you can explain this. But then, my follow up question would be, can “they” not turn around and play the exact same trick on your crypto of choice? These are, like you say, exciting times!
I do think others will take up the slack. It’s going to be very difficult for them to control a system that can create new trading vessels outside of their control faster than they can spin up control mechanisms.
Part of me thinks that all this will do in the end if really light a fire underneath the ‘privacy’ coins like Monero, zCash, DASH and others. The ones that have their own decentralized exchanges and/or margin/optionality built in will also resist this stuff as well.
Remember that capital always flows to where it is treated best. And this is why for the first few years of this equity bull market retail didn’t participate. The High Frequency scalpers just destroyed liquidity and the central banks gave preferential access to the big banks to allow them to take the other side of the trade against their clients.
Thanks, this is a reassuring endgame, and clarifies the power of these decentralized blockchain based currencies to take over the role of central banks. No wonder they are trying so hard to bring them under control! I’m a student of value investing so did not see the “value” of cryptos for a long time. The attention of central banks should be all the sign anyone needs that there is big fish to fry here. If this persists, one certainly hopes the Monero/DASH/zCASH will break out. Now, thought experiment. If Elon Musk ever succeeded in sending people to Mars, which currency would you recommend a value investor carry on the trip, knowing you might never come back to Earth: gold or Monero or DASH or Bitcoin, or, forgive the thought, T-Bills?
it would have to be one of the privacy coins that uses the least power to mine… so a cryptonote one.
gold is too heavy to launch into space. digital currency is the only solution
Neat! I feel like I understand what to bank on in the crypto space so much better! Also found your recent post about Litecoin and Charlie Lee selling his stash especially valuable! There’s a lot more than meets the eye in this brave new world. You really help folks untangle the Gordian Knot of cryptos. Keep up the great work!!