Trump Administration Popped 2017 Bitcoin Bubble, Ex-CFTC Chair Says

SAN FRANCISCO - The Trump administration acted to deflate the bitcoin bubble of 2017 by allowing the introduction of futures products, a former official said Monday.

"One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the director at the time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of popping the bitcoin bubble. And it worked."

In a speech at the Pantera Summit in San Francisco on Monday, Giancarlo elaborated further, saying bitcoin's dramatic price run-up in December 2017 was the first major bubble following the 2008 financial crisis.

Bitcoin futures listed by the Chicago Mercantile Exchange and the CBOE Futures Exchange were announced by the CFTC on Dec. 1, 2017 and went live on Dec. 18.

Bitcoin's price peaked at nearly $20,000 one day earlier, on Dec. 17, before falling dramatically in subsequent weeks.

Of course, there are different views on what ultimately brought bitcoin prices back down to Earth, reaching lows in the $3,000 range in late 2018.

Giancarlo cited research by the San Francisco Federal Reserve that also credits the introduction of bitcoin futures for reining in a market driven by optimists.

"The CFTC staff handled it strictly on procedural grounds, but at the leadership level I communicated with Treasury Secretary [Steven] Mnuchin and NEC Director Gary Cohn, and we believed that, should bitcoin futures go forward, it would allow institutional money to bring discipline to the value of the cash market," Giancarlo told CoinDesk.

The bitcoin bubble of 2017 must be viewed in the context of the financial crisis of 2008, Giancarlo said.

In the case of 2017, permitting bitcoin futures presented just such an opportunity.