The crypto market has been very stable in recent days and weeks, except for the sudden drop in prices during the night from Thursday to Friday, and the volatility has reached its youngest value in Bitcoin’s history. According to the latest studies, the Bitcoin futures in particular are responsible for this.
Last December, when the CBOE and CME derivatives exchanges launched the first regulated US bit-coin futures contracts, many investors hoped that institutional investors would enter the market. This should start a new Bitcoin rally, attracting fresh capital to the market.
In fact, the Bitcoin price rose to previously undreamt-of heights and reached its then and now maximum with a price of over 20,000 US dollars. A few weeks later a downward movement began, which continues to this day and brings the crypto market from its former high altitude to a stable level.
A group of researchers from the Federal Reserve in San Francisco recently found out that the introduction of Bitcoin futures was the reason for Bitcoin’s fall in prices and a more stable price for Bitcoin and the crypto market. The futures contracts allowed institutional investors to shorten Bitcoin for the first time.
In an interview with Fox-Business, the chairman of the CFTC, Christopher Giancarlo, stated that the chosen strategy met with heated criticism, but in his opinion was the right way to bring more financial products to the market and thus achieve a more sustainable price level (freely translated):
According to the San Francisco Fed, it was the Bitcoin futures upswing that actually shook the Bitcoin bubble that broke out in late 2017, and we have seen Bitcoin, perhaps according to some people, a more sustainable level than during the bubble period last year.
Giancarlo further describes that without the influx of institutional investors, the market would not have reached the maturity we find today. Especially companies such as the Intercontinental Exchange and TD Ameritrade as well as other university foundations such as Yale, Harvard or MIT have contributed significantly to further development through their investments in crypto funds:
We see more institutional movement in this area, and I think with more institutional movement, we should see more maturation of it. Like all things it takes time to mature, and with the movement of more institutional investors into this space, I think we will see this maturation.
He comes to the conclusion that crypto currencies are well on the way to becoming a mature financial institution and could establish themselves in the mainstream in a few years. We are excited and hope that the current sideways movement will end soon and that prices can rise again.