A recent study by Arcane suggests that CME futures expiration dates have a tendency to cause a drop in bitcoin prices ahead of the monthly settlements. According to researchers at Arcane, bitcoin takes a 2.27% clobbering on average every month towards the CME futures expiration dates.
On September 27, 37k bitcoin options will expire and many can’t help but wonder whether bitcoin is in for further losses.
BTC Price Is Manipulated Prior To CME Futures Settlement
According to the report by Arcane Research, the settlement of bitcoin futures, particularly by the Chicago Mercantile Exchange (CME) group have a bearish impact on the price of bitcoin. From January 2018 to August 2019, Arcane found that the price of bitcoin had plummeted 75% of the time right before CME futures expired. In simple terms, bitcoin had plunged by an average of 2.27% in 15 out of the 20 months under review and only risen ahead of the settlement date in only 5 months.
Per Arcane researchers, this trend is more than just a coincidence. One analyst at Arcane, Bendik Norheim Schei noted:
“Statistically, it is highly unlikely that the price falls in advance of CME settlement should be caused by mere coincidence. The figures thus support a hypothesis that the bitcoin price is manipulated in advance of CME settlement. However, the figures do not say anything about deliberate manipulation or, for example, only a result of investors’ strategy of hedging.”
Schei then went ahead to point out that the fact that CME futures are cash-settled instead of physical settlement in actual bitcoin, makes a strong case for manipulation:
“These futures are optimal for manipulation. They are settled in dollars and not on bitcoin. The price for the settlement is determined by the bitcoin price in the underlying market. Thus, it is never actual bitcoin that change hands, and it is just an overlying market traded in dollars.”
It’s not just Arcane Research that has noted this phenomenon. Analyst and angel investor Crypto Welson observed that bitcoin slumped most times before the expiration of CME futures and recovered after the settlement. He then predicted that bitcoin was poised for a reversal after the expiration of the bitcoin futures tomorrow.
Are Bakkt Futures Any Different?
The distinguishing feature of Bakkt futures is that they are physically-settled. Bitcoin aficionados are banking on this exact feature to draw investors away from cash-settled futures, hence alleviate this issue of price manipulation.
Despite the fact that Bakkt’s launch was characterized by disappointing trade volumes, Bakkt officials have assured the community that the bitcoin futures will help the bitcoin market attain price discovery. Nonetheless, it remains to be seen if Bakkt will actually draw a good number of institutional investors to its platform and curb this trend of bitcoin price manipulation.
Where’s Bitcoin Headed Next?
At the moment, the bitcoin fear and greed index is indicating a reading of 12 which implies ‘Extreme fear’. This little-known index captures the sentiment of investors in the bitcoin market by analyzing Google trends, random survey responses, and bitcoin trading volume. The reading of 12 that the index is currently flashing means that traders are distressed with bitcoin’s price.
Daily market commentator Josh Rager opined that a drop to the $7,000 is possible if the recent drop is not a bear trap.
According to Rager:
“If Bitcoin fails to break above the current level, we’ll get another retest of the support below – which has bounced once and could hold. But if this isn’t a bear trap I do see price heading down to low $7ks. Lots of buyers are waiting between $6,180 & $6,500.”
Notably, as bitcoin slumped pulling down other large-cap cryptocurrencies with it, investors took shelter in tether stablecoin. Currently, Tether’s daily volume stands at $20.7 billion as per CoinMarketCap, higher than the trading volume of all top 10 cryptocurrencies, but bitcoin summed up. This implies that bitcoin investors are hedging their positions in a scenario where the top crypto slumps further.