The Trump administration blew up the 2017 Bitcoin bubble, says former CFTC president
SAN FRANCISCO – The Trump administration acted to deflate the 2017 bitcoin bubble by allowing the introduction of futures products, a former official said on Monday.
Christopher Giancarlo, who left the Commodity Futures Trading Commission of the United States (CFTC) at the end of his five-year term as president, this happened in April, he told CoinDesk in an interview:
“One of the untold stories of recent years is that the CFTC, the Treasury, the SEC and the director of the National Economic Council at that time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of bursting bubble of bitcoin and it worked. “
In a speech at the Panther Summit in San Francisco on Monday, Giancarlo gave more details and said that the dramatic increase in Bitcoin prices in December 2017 was the first big bubble after the financial crisis of 2008. That’s why The Trump administration acted in concert to address it in a pro-market manner, as mentioned.
The CFTC announced on December 1, 2017 the Bitcoin futures listed on the Chicago Mercantile Exchange (CME) and the CBOE Futures Exchange (CFE), and was launched on December 18, 2017. The price of Bitcoin reached a maximum of almost $ 20,000 a day before, on December 17, before falling dramatically in the following weeks.
“We saw a bubble building and thought that the best way to approach it was to allow the market to interact with it,” Giancarlo told the crowd gathered at the Ritz-Carlton in Nob Hill.
Of course, there are different points of view on what eventually caused bitcoin prices to return to Earth, reaching lows in the range of $ 3,000 at the end of 2018. However, Giancarlo cited an investigation by the Federal Reserve of San Francisco which also accredits the introduction of bitcoin futures to control a market driven by optimists.
Without shorts, a market has no pessimists. “If you think it is a ridiculous price but you are not the owner, there is no way to express that opinion,” Giancarlo told CoinDesk, adding the following:
“If you don’t have that derivative, then all you have is believers and it’s a market of believers.”
The lack of easy ways to shorten has been cited by other researchers as propping up prices on other crypto assets.
“The CFTC staff handled it strictly for procedural reasons, but at the leadership level I contacted Treasury Secretary Steven Mnuchin and NEC Director Gary Cohn, and we believed that if bitcoin futures advanced, it would allow the Institutional money brings discipline to the value of the cash market, “Giancarlo told CoinDesk.” And that is exactly what happened. “
Lessons from ’08
The 2017 bitcoin bubble must be seen in the context of the 2008 financial crisis, Giancarlo said.
In 2008, the former regulator ran GFI Group Inc., an over-the-counter negotiating table on Wall Street that became one of the largest exchanges of credit default swaps: the financial instrument that wreaked havoc on US markets.
“Upon leaving the financial crisis of 2008, the legitimate criticism of regulators was similar to: Where were they during the expansion of the real estate mortgage bubble and why did they not take measures to burst that bubble when they could?”
That feature gave visos and alerted regulators who acted quickly on the rise of Bitcoin, the specialist added.
For Giancarlo, the lesson was clear: regulators should not be complacent when faced with a bubble, but they must act in a way that keeps markets free. In the case of 2017, allowing bitcoin futures presented such an opportunity.
“I think it shows the power of markets to bring discipline to prices.”
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