By now you have heard the news — Bitcoin futures are launching this December, bringing in a wave of institutional money. Futures add an air of legitimacy the cryptocurrency space — a space many have considered to nothing more than a bubble or passing fad.

But the big question everyone is wondering is : What will futures do to the price of Bitcoin?

(P.S. If you don’t yet know what futures are, check out my other article “The 5 minute guide to Bitcoin Futures”)

The general feeling in the air is one of euphoria — with futures comes a wave of institutional money that should be good for Bitcoin right?

Well, maybe…but let’s back up a bit.

Two Opposing Views of Bitcoin.

There are two main camps in the Bitcoin universe: In my head I call them “The Believers” and “The Skeptics”. The believers see Bitcoin as a revolution that will change the way we interact, not just with money, but with each other and the world.

From the Crypto Anarchist Manifesto:

So too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions. Combined with emerging information markets, crypto anarchy will create a liquid market for any and all material which can be put into words and pictures.

(I for the record, am a believer.)

The skeptics, on the other hand, see Bitcoin as essentially valueless. Tulips, economic bubbles and the south sea are often used to dismiss the potential of Bitcoin.

Side note: Speculative bubbles exist for world changing technology too. They are often the instigating spark that puts the tech on the map buy capturing the world’s attention. Witness the Amazon bubble, for example. For a great explanation of this, see this article by https://medium.com/@zemacedo

What does this have to do with futures?

Untill now, the only way the skeptics could influence the market was by refusing to participate. But with the arrival of futures, skeptics can now put their money where their mouth is — and actively bet against Bitcoin.

One camp sees Bitcoin as having near unlimited value — the other sees is as essentially worthless. They both can’t win…

But wait, there is more.

Another group is coming to the party — The institutional investors. And they love to crash parties.

Take this tweet from long time FOREX trader @Crypto_Ed_NL:

The implication is that large institutional players will want to suppress the price first, so they can accumulate Bitcoin at a discount. It wouldn’t be the first time institutions were suspected of price manipulation:

So to sumerize, we have three groups in this battle for the future of Bitcoin:

The believers — War cry “Hodl”

The skeptics - War cry “But, but…Tulips!”

The institutions — War cry “We want your cheap Bitcoins now so we can sell them back to you later at a markup.”

Who will win?

I would be lying If I said anybody knows. All we know is we are entering a new era of price discovery, one where institutions trading Bitcoin without ever having to buy the underlying asset get to bet against us if they want.

While we can’t predict the future, we can look at the past.

History does not repeat itself, but it does rhyme. -Mark Twain

If only there were some other type of rare asset, one that had to be “mined”. One that people turn to to hedge agains a falling dollar? One that has an active futures market?

Enter — precious metals.

I have been continuously amazed at the similarity of the Bitcoin chart to early 1970’s gold prices. If I scale the Bitcoin price (slow it down by 4.3x speed shrink it by a factor of 60), and overlay it with the gold chart, this is what I see:

Gee That gold curve from the 70’s looks familiar…

Not only are the major swings the same, but even some of the minor dips are repeated at the same place on both charts. Stare at that for a while and wonder!

Either the universe truly is one big fractal, or someone has been using the gold chart as a playbook. (Or both..)

The chart above extends until Dec 31 1974 — the day gold futures were launched.

Don’t you want to see what happens next?

Patience, we need to look at silver first…