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I read a pretty good article by Alexander Osipovich. (https://twitter.com/aosipovich?lang=en) It talks about how bitcoin futures manipulation would work: https://www.wsj.com/articles/bitcoin-futures-manipulation-101-how-banging-the-close-works-1513425600#=
“The scenario most often discussed involves pushing around the price of bitcoin when the futures contract expires. This is a classic scheme often called ‘banging the close.’”
The scheme would work by buying a huge about of bitcoin on the Gemini exchange as contracts are set to expire. (The first contracts are set to expire Jan. 17th.) This might work because Gemini’s volumes are thin, averaging only $1.3 million per day.
“Consider this scenario: Cryptocurrency veterans say a small number of so-called whales hold many of the bitcoins in circulation, because they invested early, when bitcoin was cheap. Such an investor could short bitcoin futures, then dump their stash of bitcoins just before the futures expire, causing a world-wide price crash and profiting from their short trade, while also cashing in their years-old bitcoin investment. If they did the selling on overseas bitcoin exchanges instead of at Gemini or any of CME’s partner exchanges, it would be tough for U.S. officials to catch them.”
Here’s another article that contains the same concerns about the Gemini market futures being manipulated. https://www.bloomberg.com/gadfly/articles/2017-12-12/bitcoin-bulls-should-focus-on-futures-exit-not-entrance
And again, another with the same concerns: http://streetwiseprofessor.com/?p=10764
“Moreover, the CME contract will be based on prices from several exchanges, but notably exclude the supposedly most liquid one. The cash settlement mechanism is only as good as the liquidity of the underlying markets used to determine the settlement price. Bang-the-settlement type manipulations are a major concern, especially when the underlying markets are illiquid: relatively small volumes of purchases or sales could move the price around substantially.”
I believe this is mostly downward pressure on the price. Are there good counter arguments I’m missing? What do you think?