Fed Watch & Bitcoin Update

All eyes on the Fed today as a decision on interest rates will be released at 2pm EST.

The CME Fed watch tool today is showing odds of a quarter point rate hike at 96.3 percent.

Precious metal prices ahead of the decision are relatively flat. The U.S. Dollar and Ten-Year Treasury yields are trading sideways ahead of the decision.

Wall Street traders will be looking for any information that would indicate possible future Fed decisions on rate hikes. Algorithm programs are locked in and ready for action in the event that any unexpected news hits the wires.

Bitcoin Update

Reported in the Wall Street journal on Saturday was a story about Government regulators who have requested that several Bitcoin exchanges hand over comprehensive trading data to assist in a probe into whether manipulation is distorting prices in the cryptocurrency.

Bitcoin futures are traded on the CME Exchange and their final daily prices derive from prices at four Bitcoin Exchanges: Bitstamp, Coinbase, Itbit and Kraken. Manipulative trading in these exchanges can skew the price of Bitcoin futures that the government directly regulates.

Unfortunately at first, some of the cryptocurrency exchanges declined to comply, arguing the request was intrusive. Really? Then feeling the heat from the Feds they decided to provide some data. But what I find interesting is, why did the CME agree to limit data of just a few hours of activity in trading instead of monitoring trading activity of the whole day?

The bitter exchange between the CME and the cryptocurrency exchanges frustrated government officials and then the CFTC had no choice and subpoenaed the exchanges for their data. The CFTC said the CME should have had in place agreements that would compel Bitcoin markets to share their trading data, which controls future Bitcoin prices.

What many folks don’t know is that the final price of each Bitcoin contract in the future is set on the last Friday of its month, based on the average of the price of Bitcoin at the four exchanges during an hour long window. The CME and the CFTC are supposed to monitor the trading activity during that hour to ensure that individuals don’t skew the price of the futures.

A CME spokesperson said, “All participating exchanges are required to share information
including cooperation with inquires and investigations.” But not surprising, a spokesperson
from Bitstamp, when asked about their intent to cooperate, declined to comment and a spokesperson for Coinbase didn’t even respond. The chief executive from Kraken said that worries about Bitcoin manipulation were over exaggerated.

So I’m sure as the debate goes on, the government regulators will have no choice but to keep
putting pressure on the Cryptocurrency exchanges to comply. And eventually it will probably take an act of congress to put the needed trading regulations in place.

Have a wonderful Wednesday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.