The FED and prominent economists claim that the bitcoin futures market eventually led the cryptocurrency market to collapse and record the third worst rally in its history.
In a recent column, Yukio Noguchi, a Japanese economist, noted that the sudden change in trend from a bull market to a strong bear cycle was activated by the introduction of the CBOE and CME bitcoin futures market in December 2017.
In 2017, the cryptocurrency market hit its all-time high, rising to $900 billion in valuation. The price of bitcoin, the flagship cryptocurrency in the global market, reached $20,000 and the price of ether broke $1,400. However, in January, the price of cryptocurrencies began to decline, finally recording a 70 percent recovery with seven months.
Investors such as BitMex CEO Arthur Hayes noted that given that the cryptocurrency market is still at its early stage and has gone above 300 percent in a year, investors have to expect 70 to 80 percent recovery as they are natural.
Yet, Noguchi noted that the link between the fall in the price of cryptocurrencies and the futures market was not only an accident, saying that the bitcoin futures market was the main reason behind the 2018 recovery.
Noguchi went to the extent of stating that the cryptocurrency market will not be able to go through a fast development in price ever again, as a result of the existence of the futures market.
“Because it’s now possible to trade on bitcoin futures, you’ll never see a rapid surge again,” Noguchi said.
Several analysts in the cryptocurrency space have also given different views into the futures market and its effect on the cryptocurrency sector. Some have stated that as a result of the fixed amount of long and short contracts that exist in the futures market, it is not possible to manipulate a market that is worth over a few hundred billion dollars.
In addition, Noguchi’s prediction that the cryptocurrency market will never experience a rapid development is similar with the predictions of the majority of economists to following every major recovery the cryptocurrency market went through in 2010, 2014, and 2018.
Even though Noguchi stated that the presence of the futures market will never permit the cryptocurrency market to go through rapid development on the upside, the FED noted that for new asset classes, these behaviors and market trend are usual.
“The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset,” read the paper of the FED.