Topic: Bitcoin vs Gold : manipulation through derivatives (Read 637 times)

Hi Mnichman,

Thanks for your clear explanations. I feel exactly the same way, and I must say I was more than troubled when the news came out that future market on bitcoin is now allowed. How can one not realize that by allowing it, authorities just show what will now be their strategy : destroy it thanks to greed being so well distributed among human beings ! They won't just "forbid" it, as I read her and there, they're too smart for that ! We now see how bitcoininvestment is EVERYWHERE, on TV, newspapers, etc. It's scary ! The mass is coming in at crazy levels, and when they'll decide it, they will destroy the value. This will make the vast majority of investors run away, and bitcoin might be left with what it should be  : a fantastic monetary device away from the eyes of government. But unfortunately, it might have a value that will not reflect its worth, in complete opposition with what it is today.

So there are still 2 uncertain outcomes :

1. Even if the bitcoin value is destroyed, will it still be used "strongly" to allow it to survive ?
2. What will happen to other currencies (altcoins), which will not be traded with derivatives (bitcoin cash, ethereum, Dash, Monero and others) ? Will the active community move to another currency that can't be rigged ?

I bet we are now quite close to see bitcoin price being slowly more and more manipulated. The price might continue to rise for a few months, letting the mass come in through the new derivative markets. But the time it will crash might just be around the corner...

This is a huge topic and nobody has answered the poster's original question.

I have been searching for an answer for the last two months and here's what I have found:

Gold and Silver are clearly manipulated through the futures market and naked shorting which is allowed for the larger banks.

Andreas Antonopolous has stated that as long as there is a physical market behind the futures market, there cannot be manipulation and dismissed the problem with a wave of his hand.  I think he may have missed something.  Although the CME futures will be cash settled and therefore will remain distinct from the underlying physical markets, there is a mechanism which will couple the futures with the physical markets and will be the lever by which the Fed and its banks can possibly manipulate the price in any direction it wishes.

The mechanism is "Cash and Carry Arbitrage" and the reverse, "reverse cash and carry Arbitrage".  When the futures price is higher than the physical exchanges price, there is an opportunity to run arbitrage (cash and carry) on this where one sells the future and buys (goes long) on Bitcoin.  This allows a trader to make the difference as profit while putting upward pressure on Bitcoin and downward pressure on the futures.  The reverse works the same - if the futures prices is below the physical price, a trader can short Bitcoin and go long on the futures to arbitrage the gap.  This puts downward pressure on Bitcoin and drives down the price.

A group of traders, lets say two or more of the Fed's subject banks could collude to buy and sell to each other futures short positions (price below physical Bitcoin) and apply downward pressure on Bitcoin which an army of arbitrage traders will be glad to trade.  Once these futures mature, the banks simply create more and as many as are needed to lower the price to wherever they want it.  Given the Fed's magic checkbook, there is no limit to the amount of such shoring or in the length of time they can run it (just like Gold and Silver).  They will take both sides of the futures trade just to insure that there is a constant massive short position in the futures market and can settle up on the losses/gains with the Fed's printed money later.  The market will do the arbitration for them.

In a nutshell, the mechanism is this:  The futures market applies price pressure on the physical Bitcoin price through the process of arbitration.  This is the lever by which Bitcoin can be manipulated up or down.

The Fed has a very strong motivation to control the price of Bitcoin just as they do with gold because gold is the canary in the mineshaft to the inflation coming our way due to the massive and out of control money printing.  The Fed cannot have people running to gold for safety and the same will be true for Bitcoin.

Notice that the there was no resistance to the cash settled futures market for Bitcoin.  Somebody must want this for some purpose.  There was no government sponsored trading platform of actual Bitcoin, just a cash settled futures market.

I love Bitcoin and I am heavily invested.  I believe it to be honest money in a global economy that has been corrupted by fiat money.  However, I cannot seem to get past the single most important and still looming threat voiced by the senior Rothschild which I paraphrase "give me the power to coin a nation's money and I care not who makes its laws"

I don’t really know, but sometimes I think that it is true that financial institutions will be able to rig it if many people are into, well, normally we do believe that if lots of people get into Bitcoin Investment it will make the cryptocurrency very good and that things will turn out pretty good.

What if it won’t really be like that as we normally think, what if things turns out to be different. Sometimes I just say to myself it is better that few people invest on bitcoin lots of people doing so.

We cannot create gold as we create bitcoin. It is right to say that huge institutions have played at will with gold and its rate. But this cannot be possible for bitcoin, due to the blockchain.

Gold is a material, tangible thing. Bitcoin is not.

And actually, even though giving more control over bitcoin to financial institutions could be problematic, we are quite far from such situation.

Bitcoin is rather seen as "the future" for now!

I didn't quite understand what you meant to say

More specifically, I don't quite understand what you mean by America withdrawing dollars. From what exactly should they withdraw them and why should it affect prices? If you mean dollar appreciation, this could potentially bring the gold prices down but 1) this would have nothing to do with gold market manipulation in the sense it is meant here, and 2) this has never happened in the past (at least, not in any significant degree), i.e. the American dollar has been steadily albeit slowly depreciating over time, and consequently, the price of gold tends to rise in nominal dollars over longer periods

Sadly the world is filled with people who only care about themselves and not for the society and it's welfare. They don't care if it's gold or bitcoin,they see it  as an opportunity and quickly bite on it. The human behavior influences the price very badly on every possible product or service or a want of people. The cycle of humans dominating gold and bitcoin and future elements will continue even if a new variable is introduced to the cycle.

In fact, the manipulation of gold can also be. Imagine that America will now withdraw dollars. Then the price of gold can fall because of lack of dollars. Does gold have the same negative feature as with bitcoin. To spend your reserves need to exchange for Fiat. That is why it is very important that bitcoin had the properties of a currency.

Bitcoin, gold and silver all have their place in a modern day portfolio. They all play a role and should only be ignored at your own peril. Bitcoin is not the same as precious metals, although there are some overlaps.

I didn't think about Bitcoin along these lines yet

But as I said in my first post in this thread, this is certainly not possible with a very limited resource like gold if the question is about artificially lowering gold prices via market manipulation. You can't "rig it by rolling over, month after month, year after year" because 1) you can destroy neither gold bugs nor central banks buying gold since they don't buy for making short or mid term profits, and 2) when you can't deliver on your contractual obligations (read you don't have real gold), it essentially means that you're ruined, as simple as that. That's why you won't see a lot of gold manipulation in real life. As I said, shorting gold can be lethally dangerous

Thanks for your input again. I believe you're right when you say "This is obviously not the case with real commodities like gold which is a scarce resource". No doubt about that. But then you write "when you run out of gold, the game is over for you". The only doubt I have is : "when is the game over ?". Don't you think it's possible to rigg it by rolling over, month after month, year after year, finally destroying the last gold bugs who surrender and cannot compete anymore. My fear is that this could also happen with bitcoin. I wish I'm just paranoied... But you know, concerning gold, it's well documented that there were many times where gold deliveries could not be made as promised and were just replaced with a "cash deal", just meaning you get a little more money for the gold they can't deliver, and let's rock and roll ! It's just scary...

Yes, you are pretty much wrong

And that can be easily proven since you look only at one side of the equation, i.e. the fiat side by claiming that it is like a casino, and the winner is the dude who has most cash. This is obviously not the case with real commodities like gold which is a scarce resource. In other words, you can't sell gold which you don't have since otherwise you risk a default on your obligations. This, in its turn, basically means that no matter how much money you have or can print, when you run out of gold, the game is over for you. In a nutshell, it is not a casino-style shebang. Hope this helps

Russia and China use gold because they can't offer something different. China of course has now become a locomotive of the world economy but this applies only to production. If the Western countries will come up with a mechanism to return production capacity to their countries the dominance of China can very quickly end. About Russia in General can not speak. This country does not depend. It seems to me that if all countries had the opportunity to impose its own currency as the Americans, they would use it.

Gold is not Bitcoin

It can be financially fatal to manipulate gold via gold futures or whatever if your point is about bringing gold prices down. There are plenty of gold bugs waiting to buy physical metal as well as a few governments ready to shell out big way on gold and increase their gold reserves whenever gold price goes down. China and Russia seem to be the most prominent countries in this regard since they make biggest buyers of gold among nations. Obviously, this is not the case with Bitcoin, so the answer to your question should be a huge no, but not in the way you think. They can't manipulate Bitcoin like gold simply because they can't manipulate gold. In other words, the whole premise of your post is entirely wrong
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Thanks for your input. I've been reading a lot of these types of comments, but unfortunately it is certain that ALL prices of ALL markets are manipulated, as soon as central banks are involved. There is not even a discussion about the fact that central banks manipulate markets just by the fact they enter it : when they buy bonds, it is manipulation because a central bank is not a regular player : it has an unlimited access to cash and can in fact never go bankrupt (we witness it since 2008).

What you're saying is that central bank is a regular player, as is any type of investor. I can accept this point of view, and in this case I would agree that at the end, nothing is manipulated at all : you have small players, big ones, and central banks that have an unlimited access to cash. They all access the market, and the truth is THEY are the market. OK, why not ? But if you're right, call it manipulation or not, at the end of the game the last word goes to the player that has unlimited access to cash, to make the market move where it wants. It's a bit like trying to win against a Casino : the only way (and this was proven mathematically) is to have more money than the bank. But in our case, who has more money than the Fed

Basically however you look at it, you are convincing me that the only way bitcoin would definitely not be rigged would be that it should have NO LINK at all with any leverage trading, future market, etc. that allow the rigged cash game to come into play. And this scares me a lot...

Prove me I'm wrong

Gold is not Bitcoin

It can be financially fatal to manipulate gold via gold futures or whatever if your point is about bringing gold prices down. There are plenty of gold bugs waiting to buy physical metal as well as a few governments ready to shell out big way on gold and increase their gold reserves whenever gold price goes down. China and Russia seem to be the most prominent countries in this regard since they make biggest buyers of gold among nations. Obviously, this is not the case with Bitcoin, so the answer to your question should be a huge no, but not in the way you think. They can't manipulate Bitcoin like gold simply because they can't manipulate gold. In other words, the whole premise of your post is entirely wrong

OK guys, maybe I'm not so clear with my question. Let me reformulate :

The question is this : gold is a sound currency, as is bitcoin. However gold markets were able to be rigged by using future markets or leverage to suppress its price. Now that future markets are available for bitcoin, as is leverage trading, how could it be that bitcoin prices couldn't be also rigged when big players enter the game, like they did with gold ?

If you take a moment to answer, you would make my day :-). Please prove it will not happen...

Not at all bro.As all of us know Bitcoin cash is came last fork,did it impact the bitcoin price? Instead,it increase the value of Bitcoin.As like that Bitcoin gold also at first impact the price of to to three days,then bitcoin will regain it's strength and start to raise it's value.Wait till the fork to see this..

Thanks for your replies.

"same like CME issuing bitcoin futures" : well that's exactly my point. I know the question has been already addressed, but I still didn't get a clear answer on how bitcoin future markets or even simple leverage trading on bitcoin would be somehow different than what we see with gold future or leverage trading. If someone can explain why bitcoin couldn't be rigged by very big players, as it is with gold market, I would love to read it.

I've even heard the "great" Andreas Antonopoulos answer this question in a conference by simply saying that derivatives are not dangerous if the underlying product is sound. He was of course referring to the rigged money supply controlled by the Fed and explaining that derivatives are in this case very dangerous. But unfortunately no-one in the audience asked him to make a parallel with gold, which in my view is very equivalent. But I'd love to be wrong and if someone can demonstrate me I'm wrong I'd be very happy 😊

Definitely,as bigger institutions enter the market and issue same like CME issuing bitcoin futures,big manipulation of bitcoin price would be made.Bitcoin price may reach very high quickly and may even crash all of a sudden.Many people feel happy on seeing bitcoin's price rising very high immediately after CME's announcement.We could see thousands of users immediately joining coinbase after the announcement.

But what some bitcoin enthusiasts fear is that it should not happen to bitcoin just as in the case of Tulip in the seventeenth century.

I think the influence of futures markets is exaggerated. Its an illusion.

With stocks, there are an infinite number of cases where movement in futures markets precede movement in actual stock prices. This creates an illusion where stocks prices appear to follow futures prices, like a cat chasing its own tail.

The reason futures markets appear to have influence is due to the stock market trading during limited hours. Bitcoin trading is 24/7. There won't be a period where bitcoin trading is closed and futures markets are open to create an illusion of bitcoin prices following in the wake set by futures. Instead both bitcoin trading and futures will move simultaneously and there could well be a difference of opinion between the two.

It may be that whales trading bitcoin on exchanges won't respect the opinion or price precedents set by futures trading. Time will tell.

Of course, my points about futures markets being an illusion with stocks could apply to gold and precious metals, with their limited trading day, as well.

this question has been answered many times. but in my own opinion i think both bitcoin and gold has advantage and disadvantage. both of them has their own pro's and con's but all i can say is that bitcoin is still better compared to gold. why? because its so easy to buy and sell bitcoin plus in doesnt required any legal documents or certificates which gold does. bitcoins is much valuable and still increasing but gold arent.

Hi all

I need to have maximum opinions about this very important question. I've been reading quite a few articles about this, and didn't find the answers to ease my paranoia about this.

So, let's make it simple : since some time now, it is possible to trade bitcoin derivatives (the same applies for other cryptos, it's not the point). We all (or most of us) know how gold price was able to be manipulated by central authorities thanks to its future market, allowing financial institutions who have access to unlimited supply of cash (thanks to the Fed) to use it to suppress the price of gold.

One of the aspect of bitcoin is that it is a decentralized mean of exchange that can't be printed, as gold is. In some aspect, bitcoin is the digital gold. But if it becomes more and more common to trade bitcoin futures, and if this becomes more and more popular and done through bigger and bigger financial institutions, aren't we facing the exact same problems that we did with gold ? Couldn't it be that the more popular bitcoin becomes (and other cryptos of course), the more financial institutions will be able to rigg the game and finally completely control the price of it, exactly as they did (and still do) with gold ?