Rampant Manipulation by the CME: Where's the CFTC?

CME Nov 02, 2020

If there are any readers that were under the impression that the CME is an upstanding American financial institution, then bless your heart for believing such a thing exists.

The 'CME Group' [Chicago Mercantiles Exchange] are back to their old shenanigans, which we're going to cover in this brief report.

CME Just Got Done Paying Settling a Lawsuit With the CFTC For Doing the Same Thing!

By 'same thing', this report is referring to insider trading.

Below is an excerpt from the Wall St. Journal, which provides an adequate synopsis of the settlement details from the CFTC initiated legal action against the CME (dating back to 2013):

https://www.wsj.com/articles/cme-settles-lawsuit-with-regulator-over-leaks-by-former-employees-11596570764

As this report will show, either the CME has failed to learned their lesson or they fired those two traders that 'leaked details' during "meals and entertainment" and hired Nostradamus in their place.

This one will take us a little while.

Starting at the End

Rather than winding this all back up to the beginning, it felt like a better idea to begin with the debaucherous activity that the CME is still engaged in regarding Bitcoin (specifically in terms of 'insider trading' as well as price manipulation, which they do a lot of over there at the CME).

Setting the Context: October 8th, 2020

Does anyone remember what happened that day?

If not, the chart below should serve as a brief refresher:

A Look at the Catalyst For This Initial Price Bump

Curiously, the catalyst for this increase in Bitcoin's price came from another major announcement (of a somewhat similar nature).

Potential Insider Trading

One interesting observation that I made (in the earlier hours of the day) was the notable increase in volume for no apparent reason [this was well before Square / CashApp had made their purchase of $50M worth of Bitcoin public information].

Fortunately, readers won't have to take my word for this, because apparently CoinDesk felt the bump in volume in the Futures markest (CME) for Bitcoin that an entire article was published.

I decided (that day) to archive.

Screenshots can be found below:

archived link
link to the original; please note that the current version of the article may or may not be the same...hence the decision to archive that day when it was initially observed

Volume Wasn't the Only Thing That Jumped Through the Roof That Day

This same article on CoinDesk (referenced above) noted that there seemed to be an enigmatic (at the time) increase in the bets that were begin placed on the CME futures market.

Specifically, the article details additional research from 'Skew', detailing bids that were placed at the 14k, 16k, 18k and even 20k levels for December futures expiry contracts (reminder: these all came out overnight / early hours of trading)

Link to Post on Twitter
archived link
worth observing the timestamp on the tweet, which is 5:21 a.m.

Just to beat in the fact that this definitely and undoubtedly came before the Square / CashApp $50M purchase announcement - further evidence is outlined in the screenshot below (from the same CoinDesk article in question), showing the musings of various 'traders' (as well as 'Alpha5', an "all-in-one Bitcoin Derivatives Platform").

Revisiting the Price Chart

Normally, a sudden swing upward for Bitcoin's price would be nothing to write home about.

Normally.

From No Volatility to Highly Volatile in 0...

However, in the context of the October 8th move, the timing becomes even more suspicious.

The chart above provides a banded price differential tool from TradingView around the dates September 25th to October 8th.

Notably, this session's 'high' and 'low' were > 3.32% apart (percentage calculated here by taking the distance between the high and the low / average price of Bitcoin during said span).

To put that in perspective, the sudden spike upward for Bitcoin from October 8th to 12th [+8.18%], reflects 2.5x the delta from the beginning of the examined period to its end.

This was also done in half the time that we examined immediately prior during Bitcoin's non-volatile (consolidation) period

Spinning Things Back to the 'Beginning'

Once upon a time the author of this article (Cryptomedication) published a groundbreaking (okay, maybe just popular) piece circa 2018, titled, 'Uncovering  the Real Cartel in Bitcoin'

The article (which is a riveting read, I might add), begins with the following opening paragraph:

"Bitfinex, Tether, Kraken, Barry Silbert (owner of DCG), Roger Ver, Erik Voorhees+the CME and many other actors in the market appear to all be connected together and complicit in market manipulation of some sort. In addition, Poloniex, CoinDesk, and other parties appear to be at least peripherally involved."

There's that name (Barry Silbert) that we've mentioned repeatedly.

However, even more notable (perhaps), is the purposeful inclusion of the CME futures exchange among the confluence of additional entities involved here (for the record, this was written back in 2018; so its aged pretty damn well too).

CME Exchange Was Listed as One of the Entities at the Subject of a Potential Probe by CFTC

Believe it or not, the CME was also listed as one of the entities at the center of a probe by the CFTC re: 'market manipulation of the Bitcoin futures markets'

As we saw above in our example from October 8th, 2020, there's ample evidence to suggest that that there has been no slowdown in these activities by the CME.

Taking a Look at the Clear Evidence of Price Manipulation By the CME in 2018

The following screenshots speak volumes:

Substantial Evidence of Bitcoin Price Manipulation

Some Concrete Facts Extracted For You From the Chart Above:

  1. February 28th, 2018  CME launches another BTC Futures contract. The price is at a localized top. Falls precipitously from that point.
  2. March 29th, 2018  CME BTC Futures contract expires. Price is at a localized bottom.
  3. April 3rd, 2018 just a few days later, there is another futures contract launch date. Price still at localized bottom. From that point the price skyrockets once again.
  4. April 27th, 2018  another CME futures contract expiration at (you guessed it) another localized top! Isn't it crazy how these localized bottoms and tops seem to damn near coincide exactly with the launch and expiration dates?
  5. May 25th, 2018 yet again at a localized bottom, the CME BTC Futures expires.

Intermediate Conclusion

We're going to put this one to the side for the time being to make room for some other interesting topics in the blockchain space that will receive their 'just due'.

In the next installment to this series, though, we will begin to peer a bit closer into:

The role that the CME has played in the financial markets (pre-dating Bitcoin), to see if we can't get just as thorough of an understanding out here as they can in there. #ambitious ; yet possible

Look at prior enforcement action

Tags

cryptomedication

Happy to serve and help wherever I'm needed in the blockchain space. #Education #EthicalContent #BringingLibretotheForefront

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