Will Bitcoin Futures Herald the End of Bitcoin?

Original article posted on Squawker

On Dec. 18, the Chicago Mercantile Exchange & Chicago Board of Trade (CME) will begin to allow Bitcoin futures trading, which is officially the green light for Wall Street

Every crypto forum I visit is exploding with theories and questions as to the fate of Bitcoin once the floodgates open.

Will futures trading send Bitcoin to the moon and bring about immense wealth for those who knew this was about to happen …

… or hail its death and line the pockets of Wall Street while leaving the average investor clueless and penniless.

Futures Are Derivatives

This is a financial instrument that allows one to make no investment in Bitcoin but rather gamble on its future value — a form of insurance against its volatile movements is how it is being sold.

Absolutely no Bitcoins are purchased — there is no flow of volume, which is usually a crucial component of increasing value. Governments and banks can technically short without buying in.

I understand why the majority of Bitcoin enthusiasts are eagerly awaiting futures because they believe money is going to pour into Bitcoin, thereby increasing value to the moon.

Not a dime is going to flow into Bitcoin through futures.

Warren Buffet has called derivatives “weapons of mass destruction” back in 2003. Time bombs that could harm not only their buyers and sellers but the whole economic system.

Buffet has gone on to explain that derivatives are perfect for masking “huge-scale fraud”.

Sort of similar to the fraud that is occurring with the amount of Tether being created and funneled through Bitfinex — right before the introduction of futures.

Artificial inflation — fake market volume is pouring into Bitcoin — and before you dismiss that possibility, take a look at Tether’s 24-hour volume compared it its market value during that initial spike past 11k in Bitcoin:

Related Article: Bitcoin Price Is Being Manipulated By Tether

Derivatives have created numerous market crashes and are responsible for blatant short selling of gold and silver markets.

Ever heard of the Commodities Exchange Inc. (COMEX)?

Owned and operated by the CME Group (same CME that is about to accept Bitcoin futures).

No deposit is ever made with derivatives. Through COMEX, banks never have to deposit physical metal yet can create an unlimited amount of paper (fake) metal.

Since banks have a limitless ability to fake gold and silver, they’re able to issue new contracts to meet demand whenever there is a spike in buying interest from speculators.

“Replacing the law of supply and demand as the price determinant, the COMEX has substituted a private club run by a few large traders who, in turn, dictate prices to metal producers, consumers, and investors.”

If gold were to obtain its true value (very similar to the technological capabilities offered by Bitcoin — hence its nickname “Digital Gold”), the US Dollar, Yen, and even Euro would disappear in days.

… or raging inflation would cripple the global economy.

Derivatives are responsible for the financial meltdown of 2008:

According to Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group:

“The global financial crisis three years ago (quoted in 2012) was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing, triggering hundreds of billions of dollars in write-downs and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008.”

“Financial reform didn’t work. Banks today are bigger and more opaque than ever, and they continue to trade in derivatives in many of the same ways they did before the crash, but on a larger scale and with precisely the same unknown risks.”

I don’t think anyone knows the total amount of global derivative debt at this point. Zerohedge, a news website that cuts through the fake, has $555 trillion in 2016, however, “according to one of the world’s leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University, $1.2 quadrillion is the so-called notional value of the worldwide derivatives market” … an estimate he came up with back in 2012.

With Futures Trading Come the Bots

As of now, 60% of all stock market trading is performed by algorithms (quants).

“Futures will destroy Bitcoin, with its high-frequency trading bots, they will create so much short-term volatility that short-term trades will get eaten, just like in the stock or futures market. Once this high-frequency algos control 80% of the volume, as they do in the stock market, it is time to find a new market. I can now see the case for Bitcoin Cash to take over Bitcoin.” (Chris Dunn)

If you think the intentional flash dips we see now in the crypto-realm are bad, just wait.

In Summary

The purpose of blockchain is that it cannot be diluted or leveraged, meaning the fed should not be able to print cryptos out of thin air. With futures, blockchain price can be manipulated and controlled with big shorts. It will allow the investment banks to game and manipulate the system.

I would not be surprised if there is an initial surge in Bitcoin value only to sucker in more investors that have been waiting on the sidelines to see what will happen come Dec. 18, however an engineered short is very possible. While I do believe in the promise of decentralization that Bitcoin may bring, I am not sure it can ultimately survive against central banks. If they cannot stop Bitcoin, then they will do everything they can to control it.

This is Wall Street. Gaming the system is what they do best.