Altcoin Daily host Austin Arnold is warning that the crypto markets could play host to some major price manipulation in the coming months.
In a new video, the crypto trader says that the introduction of Bitcoin micro futures (contracts for 0.1 Bitcoin) by the Chicago Mercantile Exchange (CME) in May could allow traditional markets actors to influence the price of BTC without having to actually own or hold it.
The contracts target retail investors, and provide a completely legal way for investors to manipulate the price of the flagship cryptocurrency, notes Arnold.
Futures contracts are known to be vulnerable to “spoofing” whereby many contracts are opened with no intention of being executed, creating false bearish or bullish sentiment. The expiration dates of BTC futures contracts have also long been speculated to be associated with dips in the price of Bitcoin.
“Ultimately, if the big guys are able to do this with what the CME contracts offer now, this is a good thing, because it does give the little guy equal exposure to these derivatives. This is [also] a bad thing because it will lead to market manipulation. With CME cryptocurrency futures, investors/traders aren’t required to actually ever hold Bitcoin. You do not need a digital wallet because Bitcoin futures are financially settled, meaning settled in fiat, and therefore do not involve the exchange of actual Bitcoin.”
Arnold says that while the CME just has micro futures for Bitcoin as of now, they also have regular-sized contracts for Ethereum which are already trading at significant volume levels.
“While there are only micro contracts for Bitcoin right now, the CME does already have regular contracts for Ethereum. The exchange also launched Ethereum futures contracts last month and those have seen around 767 contracts traded on average each day or equivalent to around 38,000 Ethereum on average traded each day since launch… So whether you hold Bitcoin, or whether you hold Ethereum, this does affect you.”