Christopher Giancarlo, former CFTC Chairman, claims that Donald Trump’s administration was responsible for the bursting of the BTC bubble in 2017. All through the introduction of futures products.
Giancarlo, who left the US futures commission at the end of his five-year term, said in an interview:
One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the then director of the National Economic Council, Gary Cohn, believed that the introduction of bitcoin futures would have an impact on the bursting of the Bitcoin bubble. And it worked.
In his speech at the Panther Summit in San Francisco, Giancarlo explained that the dramatic rise in the bitcoin exchange rate in December 2017 was the first major bubble after the 2008 financial crisis. This is why Trump’s administration has taken action to address this problem in a market-oriented manner. The Chicago Mercantile Exchange (CME) and CBOE Futures Exchange bitcoin futures contracts were announced by the CFTC on December 1, 2017. Seven days later they were put into effect. The price of asset number one reached its highest level of over $19,000 and then, in the following weeks, fell sharply:
We saw the bubble and thought that the best way to solve the problem was to enable the market to interact with it.
Bitcoin futures and ‘market discipline’
Of course, there were different views on what caused the price of bitcoin to fall to $3,000 at the end of 2018. Giancarlo quoted a study by the San Fransico Federal Reserve. They gave the green light to the introduction of Bitcoin futures contracts into a market that was mainly driven by optimists. Without shorts, the market has no pessimists and according to Giancarlo:
If you think it’s an absurd price, but you don’t have that value, there’s no way to express that view. If you don’t have such a derivative, then all you have is a believing market. The CFTC employees treated this strictly for procedural reasons, but at management level I was communicating with Treasury Secretary [Steven] Mnuchin and NEC Director Gary Cohn, and we believed that if bitcoin futures moved forward, it would allow institutional money to discipline the value of the spot market. That is exactly what happened.
If that is the case, then one might wonder why the American prominence did not decide to ‘end’ the bubble in 2008? Giancomo shares these doubts:
Coming out of the 2008 financial crisis, the legitimate criticism of the regulators was: where were they during the expansion of the mortgage bubble in the real estate market and why did they not take steps to break that bubble when they could?
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