Ex-CFTC Chair Claims Trump Administration Popped 2017 Bitcoin Bubble

June 20, 2022 2:38 pm

The concept of “controlled demolition” is an idea that has been gaining some traction among investors within the crypto community today.

Essentially, the idea revolves around the basis that there are key players in the market may have planned market downturns in the past and that this time is no exception.

The former CFTC official claims that the Trump administration had essentially allowed the introduction of futures products into the crypto market in an attempt to pop the Bitcoin bubble back in 2017.

Looking at what happened during that year, it appears that the crypto market did decline immediately after the introduction of futures.

The price of Bitcoin had reached a price of nearly $20k before it started to crash dramatically in the following weeks after futures were launched.

CoinDesk reports:

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.

With that being said, some investors disagree if that was actually the main cause of the pop back in 2017 and there are many different views on what may be the true reasons.

It is true though that there were not as many easy ways to actually short the price of digital assets in the past as there are today which may have created a “believers market”.

The reasons may be different in today’s market environment where the market dynamics have become much more complex.

Concerns regarding inflation and economic uncertainty all play a part in today’s environment.

Except this time, the controlled demolition may not be for crypto, but perhaps for other markets such as equities or fiat which may one day pave the way for CBDCs which has continually been a hot topic for all central banks around the world.

Yahoo reports:

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.”

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