After strong valuations over the weekend, Bitcoin (BTC) and Ethereum (ETH) hit important marks. While BTC returned to $60,000, ETH resumed the zone above $2,000.
However, trader Austin Arnold of the Altcoin Daily channel issued a warning in a recent video. He highlighted that a possible market manipulation is on the way.
This correction could primarily affect the two largest cryptocurrencies by market value.
CME Contracts May Cause Manipulation
The reason may lie in the new futures contracts announced by the Chicago Mercantile Exchange (CME). They will be lower value contracts – starting at 0.1 Bitcoin – and will come into effect in May.
For many, this could be the chance to get exposure to Bitcoin with lower entry costs. However, Arnold warns that large investors will be able to manipulate the market even without owning Bitcoins.
“With CME cryptocurrency futures, investors and traders don’t really need to own Bitcoin. You don’t need a digital wallet, because futures are settled financially, i.e. in fiat currency. Therefore, they do not involve the exchange of actual Bitcoin,” he warned.
Moreover, it’s not just Bitcoin that could be affected, as the CME also has ETH contracts. As these are more accessible in terms of price, manipulation can occur even in full contracts.
“While there are only micro contracts for Bitcoin at the moment, CME already has regular contracts for Ethereum. Since last month, they have had around 767 contracts traded on average each day or the equivalent of around 38,000 ETH (equivalent to $465 million at the current rate). So if you own Bitcoin or ETH, it affects you,” Arnold said.
Advantages and fears of manipulation
Speculation about manipulation in the price of Bitcoin via futures markets is not new. In fact, it has existed since these instruments were launched in late 2017.
According to the theory, the expiry dates of futures contracts are associated with falls in the price of Bitcoin. When they approach, the price of the cryptocurrency tends to fall.
At the moment when Bitcoin has resumed the $60,000 plateau, this discussion returns. However, Arnold is not entirely critical of futures.
For him, the new mini contracts have their advantages. With them, small investors can access the market without having to invest the same amount as institutional investors.
