When derivatives exchanges CBOE and CME launched the first regulated U.S. bitcoin futures contracts, many cryptocurrency bulls thought that this event would lead to a wave of institutional investment and propel the market toward even greater highs.
Just days later, the yearlong bitcoin price rally stalled, and the flagship cryptocurrency — followed soon after by the wider market — entered a decline that has continued throughout 2018.
According to researchers at the San Francisco branch of the Federal Reserve, the bitcoin futures launch triggered the decline, as it provided institutional investors with their first real opportunity to short the bitcoin price.
Alluding to this research in an interview with Fox Business’s Maria Bartiromo, CFTC Chairman J. Christopher Giancarlo credited the futures launch — and the CFTC’s “do no harm” strategy in allowing those products to begin trading in the face of criticism — with helping pop the bitcoin price bubble and bring the market back to what some would characterize as a more sustainable level.
He said on Friday:
“According to the San Francisco Fed, it was the bitcoin futures emergence that actually sapped the bitcoin bubble that emerged at the end of 2017, and we have seen bitcoin, perhaps in some people’s view, achieve a more sustainable level than it was during the bubble period last year.”
Giancarlo added that, concurrently, the cryptocurrency market has been steadily growing more mature, in large part due to an increase in institutional investors engaging with this asset class. In addition to firms like Intercontinental Exchange (ICE) and TD Ameritrade backing cryptocurrency exchanges, a number of major university endowments including Yale, Harvard, and MIT have reportedly invested in cryptocurrency funds.
“We’re seeing more institutional movement into this area, and I think with more institutional movement, we should see more maturization of it,” Giancarlo said, adding that there was still “a long way to go” to improve the still-nascent spot market.
Nevertheless, he concluded that, on the whole, cryptocurrency was on the path to becoming a mature financial instrument.
“Like all things, it takes time to mature, and with the movement of more institutional investors into that space, I think we’ll see that maturization.”
Last modified: March 4, 2021 3:48 PM