Was Bitcoin’s tumultuous volatility over past two days a prelude to when the CME starts their futures contracts next week?
December 11 is expected to be a red letter day in the story of Bitcoin as the Chicago Mercantile Exchange (CME) is set to begin selling paper futures contracts for the cryptocurrency.¬† In the meantime however,¬† the market is suddenly wondering how this will truly affect the decentralized digital currency if the past two days of trading on their primary exchanges is any indication.
Not since the the slew of market flash crashes from four to five years ago have we seen a security trade in as big a range, and over a shorter period of time, than we saw in Bitcoin between Wednesday and Friday.
After an utterly shocking day yesterday with Bitcoin prices soaring towards $20,000 intraday on some exchanges, the true chaos of the cryptocurrency is unveiled ahead of Monday’s futures launch.
GDAX shows bitcoin¬†trading up to $19,697¬†yesterday before¬†plunging to $13,788¬†and then rebounding…
GDAX is flashing $15,500, BitStamp is signaling a plunge to $14,500, and Bloomberg’s aggregate price is around $15,000 – all of which are well down from yesterday’s GDAX-based $19,600 record highs as all the fears of margin clerks were realized amid yesterday’s chaotic run. –¬†Zerohedge
When the CME starts trading their new contracts on Monday, the real question that will emerge is whether the CME can eventually take over the pricing of Bitcoin through their paper contracts the same way they do with nearly every other commodity traded in a market.¬† Because the primary significance is that the big money that will be coming into Bitcoin will not be through buying the cryptocurrency itself, but through the paper markets which cater to large institutions, mutual funds, retirement accounts, and pension funds.
The prime players outside of Wall Street are predicting that the new futures contracts will have little bearing on the Bitcoin market, and that they will end up doing more harm for investors of these securities than the likelihood of them eventually coming to control the cryptocurrency itself.¬† But as we noted above in the tumultuous volatility that has already taken place before these contracts begin trading next week, it appears likely that they will have some significant effects on the price action of Bitcoin, with the other major question being as to whether the result will be positive or negative for Bitcoin owners.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.