Fed analysts: “The price drop is associated with futures”

A new study published by the San Francisco Federal Reserve found that the decline in the value of Bitcoin in December 2017 was directly related to the listing of futures contracts linked to the price of cryptocurrencies.

“The rapid rise in prices and subsequent fall after the launch of futures is not just a coincidence,” write four Federal Reserve System (Fed) researchers.

Fed officials in recent months have not considered cryptocurrency as an alternative to the dollar or any other central bank-backed currency. San Francisco Fed President John Williams, who will take charge of the Fed's New York office next month, has been particularly vocal in his criticism of cryptocurrencies.

“One of the biggest issues is extremely volatile prices,” Williams said of cryptocurrencies in April.

Futures trading, which sometimes reduces the volatility of the underlying asset, contributed to the fall in Bitcoin's price this time around. The launch of CME contracts gave Bitcoin bears the opportunity to bet on a fall rate. In the stock market, this is called shorting and is an integral aspect of the futures markets. 

As Fed researchers write, bets on the price of Bitcoin falling after the launch of CME futures created a strong momentum that contributed to the decline in market turnover and created pressure on the price.

“After prices began to fall, pessimists began to make money from sales, thereby causing an even larger wave of shorts, which created further pressure on prices.”

In January, we wrote about the tactics of large hedge funds that openly played shorton the Bitcoin futures market. Then the study was conducted by analysts of The Wall Street Journal.

According to https://uk.reuters.com