Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Rip the Face Off the Bears Rally! - 22nd Dec 24
STOP LOSSES - 22nd Dec 24
Fed Tests Gold Price Upleg - 22nd Dec 24
Stock Market Sentiment Speaks: Why Do We Rely On News - 22nd Dec 24
Never Buy an IPO - 22nd Dec 24
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

New Evidence Futures Markets Are Built for Manipulation

Stock-Markets / Market Manipulation Nov 12, 2019 - 02:26 PM GMT

By: MoneyMetals

Stock-Markets

The recent price smash in precious metals is frustrating for goldbugs. It is even more infuriating for those who look at the fundamental reasons to own gold and silver and see prices falling anyway.

That’s why it’s worth explaining once again the real purpose of the futures markets, where prices are set. Some recent revelations about Bitcoin futures will help.

The CME launched a Bitcoin futures contract in December of 2017, and many cryptocurrency fans cheered. Those who cheered expected “institutional” money to pour into Bitcoin. Their mistakes were in assuming the institutions would be making long bets on Bitcoin and the futures market would be free and fair.



At the time, we pointed out why savvy gold investors knew better. They realize that the nation’s most powerful institutions – Wall Street banks and the Federal government – don’t like Bitcoin. This hatred by the establishment is something the cryptocurrency shares with gold.

These institutions have spent more than a century building a crooked financial and currency system which benefits them. The futures market is one tool they use to vigorously defend it.

Despite all the optimism, since futures trading launched in late 2017 the Bitcoin price has fallen by more than half. Almost nobody talks excitedly about the launch of BTC futures market trading anymore.

However, there are still those hoping for a Bitcoin ETF to gain approval. Let them be warned.

For anyone wondering why the price of Bitcoin rocketed downward instead of upward after institutions got access to futures trading, Christopher Giancarlo – the former Commodity Futures Trading Commission Chairman – just provided the explanation.

“One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of Bitcoin futures would have the impact of popping the Bitcoin bubble. And it worked.”

Federal regulators had a purpose when they authorized the launch of futures trading. They wanted to pop the “Bitcoin bubble.”

And the institutions who lined up and took the leveraged short side of all those contracts enjoyed massive profits when the price collapsed.

Investors should never make the mistake of assuming bankers and their friends in Washington have honest intentions, or that they care about free markets.

Thanks to Wikileaks, we know this strategy has been used before. They published some official discussion of the true purpose of futures markets from 1974 – when U.S. officials were planning the launch of leveraged gold trading.

It was a critical time for the U.S. dollar. President Nixon had closed the gold window, removing the last vestige of gold backing for the dollar.

Officials wanted to make the new, purely fiat dollar look stronger and discourage direct ownership of gold.

The following is an excerpt from a memo sent by the Treasury Department in London to the U.S. State Department.

TO THE DEALERS' EXPECTATIONS, WILL BE THE FORMATION OF A SIZABLE GOLD FUTURES MARKET. EACH OF THE DEALERS EXPRESSED THE BELIEF THAT THE FUTURES MARKET WOULD BE OF SIGNIFICANT PROPORTION AND PHYSICAL TRADING WOULD BE MINISCULE BY COMPARISON. ALSO EXPRESSED WAS THE EXPECTATION THAT LARGE VOLUME FUTURES DEALING WOULD CREATE A HIGHLY VOLATILE MARKET. IN TURN, THE VOLATILE PRICE MOVEMENTS WOULD DIMINISH THE INITIAL DEMAND FOR PHYSICAL HOLDING AND MOST LIKELY NEGATE LONG-TERM HOARDING BY U.S. CITIZENS.

Federal politicians and Wall Street bankers have a strategic interest in protecting the U.S. dollar from alternative currencies. Their playbook:

  1. Launch a futures market contract to increase price volatility and discourage direct ownership of the asset.
  2. Turn a blind eye when banks build massive short positions and then rig prices lower, raking in massive profits.

This playbook is how metals investors can make sense of the most recent, totally counter-intuitive, smash in metals prices. It explains, at least in part, how the bullish momentum was crushed.

The futures markets are used by institutions to punish investors for doing the right thing.

That isn’t to suggest investors ought to surrender and be herded by the bankers and bureaucrats into the dollar and other favored assets. But they will need to be prepared for artificial volatility in hard money alternatives.

Don’t forget, these people are definitely not our friends.

By Clint Siegner

MoneyMetals.com

Clint Siegner is a Director at Money Metals Exchange, perhaps the nation's fastest-growing dealer of low-premium precious metals coins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

© 2019 Clint Siegner - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in