The more I watch what's happening in the cryptocurrency market the more I'm convinced that Wall St. is using every trick in its quite extensive book to wrest control of the cryptocurrency market from the people.
First it was the futures market on the CBOE and the CME Group. Now, it's leveraged ETFs from Direxion. On their own it isn't that big a deal but mixed with the exchanges having problems adding new accounts and governments changing the rules everyday, I'm beginning to smell something rotten in the state of crypto.
First up, is this report from Zerohedge about the growing net short position of the big boys in the futures pits.
In there they are quietly and patiently building a short position amongst the non-commercial traders -- i.e. the hedge funds and prop trading desks. In the meantime retail, i.e. small groups and individuals, are net long, betting the price will rise.
Here's the breakdown as reported by the CFTC:
The good news is that open interest is still miniscule compared to the daily average trading volume. Total outstanding open interest is still just $150 million compared to daily volume of nearly $16 billion, per Coinmarketcap today.
But, when you add to this the announcement today that Direxion filed for no less than five levered Bitcoin ETF's you have to realize what's really going on here.
Warning: Road Blocks Ahead!
In the past few days a number of the major cryptocurrency exchanges either stopped opening up new accounts or suspended deposits. Binance and Bittrex have both suspended new account creation. At one point last week Coinbase wasn't taking new deposits.
And with Korea and China both trying to crack-down on the exchanges it feels for all the world to me that Wall St. wants retail forced back onto their platforms and brokerages not giving the profits to these unwashed newbies.
Those broker's fees for doing nothing play real people's salaries, man!
And, once there, of course, you don't get to buy Bitcoins. No, you can buy a leveraged ETF bet on a Bitcoin Futures contract. It's bad enough that most of these exchanges don't interact with the blockchain at all and the coins you hold there are only held in trust.
Now we have to suffer being twice further removed from the blockchain and actual asset ownership? Really Wall St.?
So, the messaging is very clear here. As this third wave of money moves into the crypto-space Wall St. wants its vig and cutting off avenues of entry means forcing the American money into their synthetic products that they make money on and not the assets themselves.
First, They Came for Your Gold ...
It's no different than the SPDR Gold Trust ETF (GLD). I can't tell you how many conversations I've had with people over the past fifteen years about buying gold. And when I finally convince them to do so they steadfastly buy GLD and not the metal itself or some mining company with a good balance sheet, assets in the ground and management team.
No, they buy more of the crap that allows the CME Group to issue more futures used to control the market. They become part of the problem rather than part of the solution.
Remember, holding physical gold is a pain. Selling it is as well. It's taxed at a punitive (collectible) rate of 28% versus the capital gains rate of up to 20%. So, from a tax perspective GLD is a better deal than gold.
And that's what their accountant will tell them, after doing everything imaginable to talk him out of owning a non-interest bearing asset.
So, here we are with the same structures being put in place to control the price of Bitcoin. They wanted Bitcoin taxed as property with a punitive FIFO system to maximize the tax liability for HODLers which would retard direct ownership when they offered up their synthetic ETFs. Thankfully, that got nixed at the last second in the Tax Cut Bill negotiations.
Expect it to come back, however, as a rider on a national defense supplementary appropriations bill to fight 'terrism.'
Also, by sabotaging the New York Agreement Bitcoin is now slow, ugly and expensive to use. Buying it for wealth storage purposes like Gold is more expensive than the average online broker's fee.
Expect more of this as time goes on. Wall St. is patient. They will erect barriers around Bitcoin and cryptocurrencies to make it nearly impossible for retail-level investors to exit their rotten system. By the end of 2018 I won't be surprised if no one you know trades Bitcoin at all. But everyone will have a little in their IRA.