Trump Administration Popped 2017 Bitcoin Bubble, Ex-CFTC Chair Says

[alyssa85]

https://www.coindesk.com/trump-administration-popped-2017-bitcoin-bubble-ex-cftc-chair-says

The Trump administration acted to deflate the bitcoin bubble of 2017 by allowing the introduction of futures products, a former official said Monday.

Christopher Giancarlo, who left the U.S. Commodity Futures Trading Commission (CFTC) at the end of his five-year term as chairman in April, told CoinDesk in an interview:

    “One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of popping the bitcoin bubble. And it worked.”

In a speech at the Pantera Summit in San Francisco on Monday, Giancarlo elaborated further, saying bitcoin’s dramatic price run-up in December 2017 was the first major bubble following the 2008 financial crisis. That’s why the Trump administration acted in concert to address it in a pro-markets manner, he said.

Bitcoin futures listed by the Chicago Mercantile Exchange (CME) and the CBOE Futures Exchange (CFE) were announced by the CFTC on Dec. 1, 2017 and went live on Dec. 18. Bitcoin’s price peaked at nearly $20,000 one day earlier, on Dec. 17, before falling dramatically in subsequent weeks.

“We saw a bubble building and we thought the best way to address it was to allow the market to interact with it,” Giancarlo told the crowd gathered at the Ritz-Carlton on Nob Hill.

Of course, there are different views on what ultimately brought bitcoin prices back down to Earth, reaching lows in the $3,000 range in late 2018. However, Giancarlo cited research by the San Francisco Federal Reserve that also credits the introduction of bitcoin futures for reining in a market driven by optimists.

Without shorts, a market has no pessimists. “If you do believe it’s a ridiculous price but you don’t own, there’s no way to express that view,” Giancarlo told CoinDesk, adding:

    “If you don’t have that derivative, then all you’ve got are believers [and] it’s a believers’ market.”

The lack of easy ways to short has been cited by other researchers as propping up prices in other crypto assets.

“The CFTC staff handled it strictly on procedural grounds, but at the leadership level I communicated with Treasury Secretary [Steven] Mnuchin and NEC Director Gary Cohn, and we believed that, should bitcoin futures go forward, it would allow institutional money to bring discipline to the value of the cash market,” Giancarlo told CoinDesk. “And that’s exactly what happened.”
Lessons from ’08

The bitcoin bubble of 2017 must be viewed in the context of the financial crisis of 2008, Giancarlo said.

In 2008, the former regulator was running GFI Group Inc., an over-the-counter trading desk on Wall Street that became one of the largest exchanges for credit-default swaps – the financial instrument that wreaked havoc on U.S. markets.

Giancarlo said:

    “Coming out of the 2008 financial crisis, the legit criticism of regulators was along the lines of: Where were they during the expansion of the real estate mortgage bubble, and why didn’t they take steps to pop that bubble when they could have?”

That view informed regulators acting quickly on bitcoin’s ascent, he added.

To Giancarlo, the lesson was clear: Regulators mustn’t be complacent when faced with a bubble – but they must act in a way that keeps markets free. In the case of 2017, permitting bitcoin futures presented just such an opportunity.

Giancarlo concluded:

    “I believe it shows the power of markets to bring discipline to prices.”

He's not wrong.

It was the ability to short that forced the prices back down.

The sad thing is I remember the bitcoin community being so excited when the Chicago Futures Exchange introduced bitcoin futures. They were even calling Giancarlo "crypto-dad".

[1715024082]

1715024082

[1715024082]

1715024082

[1715024082]

1715024082

[1715024082]

1715024082

[1715024082]

1715024082

[Lucius]

The real problem, if we can call it that at all, was the fact that most didn't even know what bitcoin futures are, the prevailing opinion was that it was a service that would allow a large amount of money to enter in the crypto market and that this will inflate the price. In short, ignorance combined with media FOMO is caused a huge influx of money from mostly small users who believed they could make a fortune overnight.

Unfortunately for many, the trap was set too well - the difference between Bitcoin futures and Bitcoin ETF is huge, which is very likely to prove in the future.

[elda34b]

If you spin it around, you can also say that US is intervening with the market to kill Bitcoin. It would be interesting if any of the media go with that narrative and see how the US would react.

[alyssa85]

If you spin it around, you can also say that US is intervening with the market to kill Bitcoin. It would be interesting if any of the media go with that narrative and see how the US would react.

They didn't kill it - they just popped the bubble because they were worried about people borrowing to buy bitcoin in 1920's style (when people borrowed to buy stocks).

If the bitcoin price stays stable for a while - say a range of $7,500 to $8,500 - then it becomes a stablecon by itself and starts to have currency uses.

[tsaroz]

If you spin it around, you can also say that US is intervening with the market to kill Bitcoin. It would be interesting if any of the media go with that narrative and see how the US would react.

They didn't kill it - they just popped the bubble because they were worried about people borrowing to buy bitcoin in 1920's style (when people borrowed to buy stocks).

If the bitcoin price stays stable for a while - say a range of $7,500 to $8,500 - then it becomes a stablecon by itself and starts to have currency uses.

Oh no. I'd not credit them with that. Crypto bubble bursted because it got inflated. Not only bitcoin, everything that shared the name cryptocoin rose without limit. And when it goes up it has to fall. Quicker the growth, harder the fall. US has least to do with that. There were many governments trying to control it. But in real the crypto burst because it was a organized pump.

[avikz]

If you spin it around, you can also say that US is intervening with the market to kill Bitcoin. It would be interesting if any of the media go with that narrative and see how the US would react.

They didn't kill it - they just popped the bubble because they were worried about people borrowing to buy bitcoin in 1920's style (when people borrowed to buy stocks).

If the bitcoin price stays stable for a while - say a range of $7,500 to $8,500 - then it becomes a stablecon by itself and starts to have currency uses.

My 2 satoshis!

It's no killing! Bitcoin market is far more complicated and it is not possible for a derivative exchange to kill it! If killing bitcoin were so easy, no one would have used it at the first place! US just tried to control the abnormal price increase by allowing accredited investors to short at the peak of its price!

I am still doubtful about the effectiveness of such method because none of these derivative exchanges deal in physical bitcoin. So no money transfer were happening from the regulated economy to crypto market. Then how come it is expected to impact?

The bubble busted due to heavy profit booking from all levels of investors. Usually that's how it happens in normal stock market!

[rdbase]

I think trump administration is trying its hardest to debunk bitcoin because the donald doesnt own any because he is a nocoiner.
This will have consequences and will only be a burden on all cryptocurrency until he is out of office and not causing anymore issues with the financial crysis we are all in now. I think he is doing this so bring more fiat in the us economy insome way. Dont ask me how because his way of thinking and rationalization is like that of a cat.

[CryptoBry]

If you spin it around, you can also say that US is intervening with the market to kill Bitcoin. It would be interesting if any of the media go with that narrative and see how the US would react.

They didn't kill it - they just popped the bubble because they were worried about people borrowing to buy bitcoin in 1920's style (when people borrowed to buy stocks).

If the bitcoin price stays stable for a while - say a range of $7,500 to $8,500 - then it becomes a stablecon by itself and starts to have currency uses.

Oh no. I'd not credit them with that. Crypto bubble bursted because it got inflated. Not only bitcoin, everything that shared the name cryptocoin rose without limit. And when it goes up it has to fall. Quicker the growth, harder the fall. US has least to do with that. There were many governments trying to control it. But in real the crypto burst because it was a organized pump.

In other words, whether the Bitcoin futures was introduced or not, Bitcoin at the time was bound to burst the bubble. Well, the other way to say it is that expecting something to consistently grow and grow is just another definition of insanity. Those people who got burned because they got that belief are not realizing they were so wrong. That can not and will not be. Yes, it is possible that the futures played some role with that but I don't think we should be crediting that fully to what eventually happened. Christopher Giancarlo is in fact inflating this story to make the role of the government seems very influential. So will somebody soon claim that the coming of Bakkt is the reason why we are now in the hands of the bears and if there will be an ETF approved Bitcoin will get back to the $1000 zone?

[Harlot]

I'm sorry but a bubble only pops once in it's lifetime and it doesn't recover from it. Bitcoin is no bubble even if what they are saying is true it only cause a correction or dropped but Bitcoin never popped as proven by what we have seen this year 2019. I just don't know why this news has surfaced now since this is what classic news media sites do connect all the news after the price movement. Which make me think that this isn't plausible, there is even no good reason why they are targeting BTC like this.

[dothebeats]

Whether there is a government intervention or not, bitcoin has to pop even then due to the massive amounts of people borrowing from credit cards in order to buy bitcoin. We all know that it's no good for the banks, moreso to the economy in the long run and at a large scale. They have to in order for everything to be controlled, else we will be seeing similar scenarios from 2008 and at an accelerated pace. Also, the futures was more of a sign that bitcoin is ready to go pop, it's just that people took it more as a sign of more gains which, sadly (and thankfully) isn't.

[Willitivity]

In as much as USA is kit comfortable with Bitcoin and other cryptos in general, it still doesn't translate to the fact that Trump's administration was the cause of Bitcoin's fall. The 2017 was a pretty cosmetic one, that's why the fall was very hard. That aside, bigger players in the game also contributed to this.

[Pearls Before Swine]

What?  This all seems preposterous to me.  Why would the Trump administration care about what bitcoin was doing?  The gov't tends to do practically nothing when the stock market is in a bubble, and they wouldn't know how to let a little air out of it if they put all their brains together in a room for a week.

I understand the mechanism of introducing shorting to the bitcoin market and it makes sense that the outcome would be what we saw, but I just cannot wrap my head around the Trump circus caring enough to do any of what they claim.  But I'm a firm believer that 90% of what Trump says can be discarded as misinformation anyway.  Can't wait for the next election to come along.

[hatshepsut93]

I'm not sure if the futures were the cause behind the crash or merely contributed to it, but either way it's a good thing, they cooled the market down and kept it healthy. Image if there was no easy way to short Bitcoin - the bubble would have kept growing, but then the crash would be much more painful, maybe it would have went down all the way to $100, and we would still be recovering.

[gentlemand]

It was the ability to short that forced the prices back down.

Balls.

You've been able to short actual Bitcoin for many, many years. The shorting introduced here doesn't even involve any Bitcoin.

It was the culmination of the ICO bubble peaking meeting selling the news. By that point things were so manic any reason to pop would've been enough. I can't believe these tossers are trying to take 'credit' for something like this anyway.

I think now its volumes are so much higher it does have an effect on market movements, witness all those falls at their expiration, but at that point no way.

[Periodik]

There is no bubble to pop out in the first place. In fact, there is no Bitcoin to switch off, kill, or suppress. Bitcoin is more of an idea. It is a philosophy shared by people who are already disenchanted with the current system. There will always be Bitcoin even after a million Bitcoin death. If there is any bubble at all, it is Trump himself. He didn't win. And the next election is going to burst this bubble for good.

[stompix]

Lols, so the guy that actually introduced the future options believed that the bitcoin price was a bubble...
And he allowed this to happen, knowing what will happen, and there are no consequences?
Pretty damn interesting!
And now, the guy that protected us has just joined the Chamber of Digital Commerce, a trade group focused on blockchain.

Too bad there is one tiny detail, CME was seeking approval from October 2016, when Trump was not in charge and the bitcoin price was at 600, far below even to the 2013 peak. So if he really wanted to stop a bubble he would have acted a lot sooner.

Another publicity stunt from a guy who lost his place in the spotlight.
We just had another one last week that was instructed to kill bitcoin, now a guy that popped the bubble, damn, it's like an epidemic.  

[Hydrogen]

If you wanted to know who popped the 2017 bitcoin bubble.

The search for the answer would lead to: who influenced the media into spamming the public with news stories on the topic: "bitcoin is a bubble" and "bitcoin is only used by terrorists and criminals" long before Trump assumed office. The search would continue with a question of: who influenced the SEC into rejecting all of the Winklevoss brothers ETF proposals. Then a question of the origins story of regulation prohibiting americans from utilizing bitmex as well as many crypto services would arise.

All of these events, and many others occurred long before Trump attained the Presidency in 2016.

One thing is for certain. Donald J. Trump is not behind fake news stories about tether being a market manipulation conspiracy theory. But if you know who is behind it, and who is behind all of the other anti crypto regulation and news stories we've witnessed long before Trump took office. Then you know the answer.  

Banks are definitely part of it. But the complete answer would be far more interesting and terrifying to consider.

[TravelMug]

I don't think that Trump has something to do with the pop in 2017. If you have to look at the charts, it's just a matter of time for it to happening. And when future contracts was offered (CME and CBOE), it is the final catalyst for that parabolic rise to get burst that time.

@Periodik - I think that circumstance is already there, that dramatic rise is not sustainable and sooner or later it will be burst. And as per definition, we are already in a massive bubble that time.