Just when regulated bitcoin futures trading seems to be within a hand’s reach, critics have come out in force lambasting CME Group’s bitcoin futures plan claiming that it could lead to catastrophic economic event reminiscent of the 2008 financial crisis.
Just a couple of days back CME Group made an official announcement that they intend to launch bitcoin futures contracts by the end of the year given all the regulatory and other requirements are met. The announcement could have partly led to the surge in bitcoin price on that day with hopes that more and more Wall Street investors will now be able to enter the cryptocurrency ecosystem and thereby fuel more growth of digital currencies.
However there are those who believe that bitcoin derivatives and the collateralized debt obligations (CDOs) that contributed to the financial crisis of 2008 could be the same thing and that bitcoin futures trading could cause a similar financial meltdown that we witnessed nearly a decade earlier.
While critics say they do not have any issues with bitcoin or digital currencies, they are pointing out that the new products based on bitcoin are being packaged into derivatives without knowing what’s underneath.
One of the major issues being highlighted is the bitcoin price difference across various exchanges around the world. This mismatch in prices would lead bitcoin to derivatives introduce significant risks to the market. Moreover considering that most of the cryptocurrency trading is still unregulated, traders can employ market manipulation strategies with impunity.
Risks such as spoofing as well as layering and other sorts of manipulation could wreak havoc and that’s equivalent to knowingly playing with fire. Retail investors will be joining the bitcoin ETF bandwagon soon after launch without a complete understanding of the risks involved under the assumption that the financial products from huge companies that are listed on regulated exchanges do not carry huge risks.