Whales looking to buy the rumour and sell the news

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Presumably the adoption of Bitcoin Futures contracts by major exchange platforms such as CME or Cboe is a sign of mainstream adoption for big money investors and also adds legitimacy to the digital currency. With the official news coming out in the past week and an official date for the release, it all helped push Bitcoin the price higher and higher until it saw gains of $1,000 per day in the past few days.

The well-known concept in finance and trading, “buy the rumour, sell the news”, seems to be coming true when it comes to Bitcoin and Bitcoin Futures too, as a massive wave of big players, such as Wall Street whales, seem to be coming into the cryptocurrency market.

Good time to get in – buy the rumour?

As Bitcoin becomes more and more popular in the media and everywhere on social media, more and more people start asking whether this is a good time to get in or if they had missed the boat. A similar trend was seen back in 2014 when Bitcoin reached $1,000 and look where we are today, with Bitcoin rapidly approaching $20,000.

However, Wall Street players seem to have made their mind and have been behind many of the barrier-breaking booms that Bitcoin has witnessed. After the Aug. 1 fork that saw Bitcoin mostly unaffected by a potential catastrophe, legitimacy was handed to it as the early adopters in Wall Street dove in.

One of the main things that attracts these big players is the 10th and 18th December deadlines, when the release of Bitcoin Futures will actually take place on CME and Cboe, respectively. It seems that both the big players and lots of smaller level investors are relying on the concept mentioned above – currently buying the rumour and trying to capitalise on the volatility of the market when the Futures come out in the next 10 days.

You buy the rumour, but when do you sell the news? 

Bitcoin Futures have been regarded as mainly a very positive thing for Bitcoin and the cryptocurrency market, but it is unclear how the market will play out once these contracts hit the exchange platforms. One of the most important aspects of these contracts is the fact that they allow traders to make profits even if the price of Bitcoin drops; this means that if large investments are made on these contracts, we could witness some degree of price manipulation by all these big players which will essentially “short” Bitcoin.

Futures allow for people to have protection on a volatile market like Bitcoin. If they enter at a certain price, and that price drops, they have the chance to pull their investment out at the same price they entered in. Therefore, a big investor would put a large amount of money into Futures, manipulate the market down, take his investment out at the same price and then re-buy Bitcoin at a cheaper rate, hence obtaining more value for the money.

According to Bloomberg, Goldman Sachs is looking to offer clients trades on a case-by-case basis. Tiffany Galvin, spokeswoman for Goldman, wrote:

“Given that this is a new product, as expected we are evaluating the specifications and risk attributes for the Bitcoin futures contracts as part of our standard due diligence process.”

If JPMorgan’s CEO, Jamie Dimon, is very reluctant when it comes to Bitcoin, Goldman CEO Lloyd Blankfein is reportedly cautious but open to the idea. He has written:

“I read a lot of history, and I know that once upon a time, a coin was worth $5 if it had $5 worth of gold in it. Now we have paper that is just backed by fiat…Maybe in the new world, something gets backed by consensus.”

 

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