Yukio Noguchi, a famous economist in Japan and an advisor to Waseda University’s Business and Finance Research Center argues we can’t expect Bitcoin’s prices to rapidly surge again. In his books and in recent articles, Noguchi makes his case eloquently. He wrote a recent article in Diamond Weekly clarifying his position but has been making his case since January of this year and published a book last December.
“Because It’s Now Possible to Trade on Bitcoin Futures You’ll Never See a Rapid Surge Again”
Noguchi points out that the price of BTC is now almost a third of what it was in December of last year. He believes that because it’s now possible to trade on Bitcoin futures people will never see a rapid surge again.
On one hand, he says that because the price of bitcoin has gone down, the costs of sending bitcoin are now back to a level that makes it cheaper than doing bank transactions and this is welcome.
He argues that the introduction of the futures market has driven down the price considerably. This year in January he persuasively argued that the cause of Bitcoin price collapse was the start of the selling of bitcoin futures. “Bitcoin prices were a bubble, to begin with, and now we’re seeing a return to normal values. The San Francisco Federal Bank, in a report, also suggested that the introduction of Bitcoin futures trading caused a price drop.
Additionally, the market is heading towards a situation in which it will be possible to short-sell bitcoin futures and that will also contribute to keeping the prices down.
Noguchi points to a paper published on May 7 by the Federal Reserve Bank of San Francisco, “How Futures Trading Changed Bitcoin Prices“, authored by Galina Hale, Arvind Krishnamurthy, Marianna Kudlyak, and Patrick Shultz. Here is the key passage:
“From Bitcoin’s inception in 2009 through mid-2017, its price remained under US$4,000. In the second half of 2017, it climbed dramatically to nearly US $20,000, but descended rapidly starting in mid-December. The peak price coincided with the introduction of bitcoin futures trading on the Chicago Mercantile Exchange. The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.”
Noguchi insists that actually, the majority of investors are predicting that prices of bitcoin will continue to fall, especially when some are able to make money from short-selling the cryptocurrency.
He also feels that allowing cryptocurrency to branch off, it makes people feel like they can get new cryptocurrency for free and that also drives down price.
Does he see that as resulting in a decline in the popularity of Bitcoin?
Surprisingly, Noguchi believes it’s a good thing. As the price of bitcoin drops, it becomes a more attractive means of sending money. He calculated that at current prices, if you had to use Mitsubishi UFJ Bank to send money, it costs you 432 yen for any amount above 30,000 yen. But with the current value of Bitcoin, it’s cheaper to send via a regular bank transfer than BTC, unless the value of BTC falls to 675,000 yen. When BTC returns to that level, it will finally be trading at what should be a normal value.
On December 20th last year, Noguchi’s book, “An Introduction To Bitcoin And Blockchain” was published and received rave reviews.