As the fluctuations in the price and trading volume of Bitcoin continue to flummox the oracles of CNBC, a noted Japanese economist has written an article to explain what he thinks killed off the 2017 bull rally and began this 2018 bear driven roller coaster ride the cryptocurrency has been taking.

Did Futures Kill the 2017 Bitcoin Rally

Japanese economist Yukio Noguchi wrote an article last week for the Japanese periodical Diamond online that is getting a lot of attention among crypto traders. In it he links the start of the Bitcoin futures market with the end of Bitcoin’s meteoric price increases in December 2017.

The CBoE began trading Bitcoin futures on December 10, 2017, that day the price of Bitcoin stumbled, dropping about $3,000 in a day. It rallied from there gaining new heights as it hovered at the threshold of $20,000 for a few days before bouncing up and down, gaining and losing thousands every other day. By January 6 it fell off a cliff and has never got back up over $10,000 in 2018.

In Noguchi’s own words, translated from the original Japanese, “Because it’s now possible to trade on bitcoin futures, you’ll never see a rapid surge again,”

Apparently, Noguchi is not alone in this opinion that the creation of the Bitcoin futures market was key to ending the 2017 bull run. According to Forbes, nearly the same argument was made in May by economists at the Federal Reserve Bank in San Francisco in a paper titled, “How Futures Trading Changed Bitcoin Prices.” The paper reads in part:

“The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence, rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.”

Unlike the usual round-up of old-school financiers who seemingly weekly predict the bursting of the Bitcoin bubble like Warren Buffet who has likened the cryptocurrency to rat poison, economists at the Fed compare the price drop to other markets that have experienced rallies and market corrections.

What Doesn’t Kill Bitcoin Should Make it Stronger

Using both the housing market crisis and the Japanese stock market devaluation of the 1990’s as examples the Fed economists point out that new financial instruments have a record of deflating financial bubbles. In this case, as excited investors drove the price of Bitcoin up, the futures market opened and pessimists were able to hedge their money against the cryptocurrency, bringing the value down.

The terrific rise of Bitcoin in 2017 brought along with it widespread public attention to cryptocurrencies and blockchain technology, which in some ways has been good for the growth of the nascent sector. It also caused a massive amount of alternative currencies to be born into the space. Some analysts have argued that the turbulent market of 2018 will, in the end, be good for the future of cryptocurrencies as weak coins die and vanish, much the same as when the dotcom bubble burst to send weaker web-based businesses into oblivion.

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