Gold and BTC futures: what happens next?

Some critics thought futures would kill bitcoin, enabling traders to short it to death. Both bitcoin and gold experienced dramatic declines after futures were launched. But the history of gold since then suggests it’s not the end for bitcoin.

The launch of bitcoin futures by major institutions in the US – Chicago Board of Exchange (CBoE) on 10 December and Chicago Mercantile Exchange (CME) on 17 December 2017 – coincided with unprecedented interest in cryptocurrency. In fact, CME futures occurred within hours of bitcoin’s all-time high. It was a hotly-anticipated development that allowed mainstream traders to bet on the rise or fall of bitcoin, without exposure to the underlying asset.

When gold futures launched in 1974, it was at a similar peak of interest. Gold’s price subsequently tanked, losing around 50% of its value in a little under two years.

The similarity between gold and bitcoin has prompted much speculation around the long-term effect of futures. Many in the bitcoin community believe that futures will prevent bitcoin from repeating its historical stellar growth, since it’s now easier to bet against the market. But another look at gold might suggest the opposite. A recent article shows how futures could be paving the way for the next rise: https://blog.goodaudience.com/bitcoin-futures-and-the-ghost-of-gold-81418864c961.

In short, futures did not kill gold. The price fell to $100 after futures were launched, but stands at over 10x that now, 40 years later. Bitcoin has followed a similar pattern, with its own timeframe and scale – it moved around 5 times faster than gold, and bottomed out around 30% of its ATH price, not 50% like gold.

There are significant differences as well as similarities between gold and bitcoin, of course. Gold was already a well-established market; people have been trading it for thousands of years, whereas bitcoin is just coming to wider attention. Conversely, it takes less money to push the price of bitcoin down, as well as up. The total value of all bitcoin is less than a fiftieth of that of all gold.

There is so much uncertainty and noise in the market that the forecasts made in this article and the ones it draws on ($70-80,000 peak by the end of 2018) should be taken with a pinch of salt – as the author admits.

But the fact that a market as large and well-known as gold could experience such remarkable growth in such a short time suggests that futures might yet play an interesting role in the history of bitcoin.

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