Can crypto exchanges utilize derivatives?
A couple weeks back I posted a piece on Goldman Slacks re-opening their Crypto desk, the premise was it will be used for Crypto derivatives which got my mind thinking about crypto exchanges being able to utilize derivatives? It would make sense they could leverage this tool like any other as Crypto's are not regulated. Well regulation does NOT equate with free from manipulation!
That said, I believe that all crypto exchanges will start to utilize derivatives to be able to influence crypto markets and thus pricing. Example, BTC the blue-chip of all Crypto offerings. Prices have hit several new highs this year and lots of institutional investors are locking up what they have already purchased making it less liquid. Recall that Crypto exchanges make money buying and selling Crypto's to you and me and others.
IF they had a tool that allowed them to influence prices either up or down would they leverage it to their benefit. Say they were able to knock a couple thousand off a price and swoop in and execute their buy order which would drive up the price back above or near where it was price to tool action. Would make for a tidy pumped up profit; no?
Who would stop such a malicious actor? In theory the in the US that regulatory body would be the CFTC agency. Not sure they would go after the big guys they would chase down the little guys the WSB guys, making a few cents while the big boys back up the trucks for their hauls they scan the horizon the other way!
In my mind this is fully possible, but then again I am not supposed to think I am just supposed to use search function and go with what it tells me. Let me know what ya think in the comment section and how far off I am.
