BlackRock Bitcoin Futures Could Bring More Manipulation

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  • The news that BlackRock, the biggest asset manager in the world, is to start offering Bitcoin futures has received a mixed reaction
  • Some have warned that the cash-settled contracts will not benefit Bitcoin
  • Bitcoin futures started in 2017 and ended the bull run

BlackRock, the world’s largest asset manager, made headlines yesterday when it applied for two Bitcoin futures funds. This may seem like another example of institutional acceptance of the cryptocurrency, but behind the euphoria there is a sense from some in the space that this move may increase the amount of price manipulation in the space.

BlackRock Throws Weight Behind Bitcoin Futures

BlackRock’s move into Bitcoin was signalled Wednesday as the investing giant, which has $8,7 trillion under management, filed for BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc., which are cash-settled Bitcoin futures contracts. This elicited an excited response from some in the crypto space:

While some were ecstatic over the acknowledgement of Bitcoin by such an esteemed player as BlackRock, others were more circumspect, and with good reason. Those that weren’t around for the introduction of Bitcoin futures in December 2017 may not know that it was instrumental in popping the bubble as Bitcoin got just short of $20,000. This wasn’t coincidence – then CFTC chairman Chris Giancarlo confirmed that this was the rationale behind allowing them in the first place.

Manipulation Warnings Over Cash-settled Futures

Warnings over the impact of BlackRock’s futures contracts aren’t without foundation then, with some quick to point out what might be in store for Bitcoin traders and hodlers:

The key here is that BlackRock is using a cash-settled format and is not interested in having any exposure to physical Bitcoin. This means that billions of dollars will go on longing and shorting Bitcoin at certain points in the cycle, with all the market influence that money of that magnitude bring. While this is not inherently bearish on Bitcoin (they will want the price to go up as well as down), it does mean that the market may be subject to the whims of Wall Street more than ever before.