In a report, Lee defined that the “gut wrenching” weak spot in Bitcoin (BTC), which dropped upwards of 20 p.c earlier this week, was the results of futures contracts expiring. Lee stated the “significant volatility” is considered one of six expirations of Bitcoin which have occurred since CBOE launched its futures contracts in December 2017. Lee wrote:
“Bitcoin sees dramatic value modifications round CBOE futures expirations… We compiled a few of the knowledge and this certainly appears to be true.”
According to Lee, Bitcoin often sees a drop of round 18 p.c in 10 days earlier than futures expiration, with costs typically recovering by six days afterward. Lee defined that if a dealer is lengthy on Bitcoin and brief the futures, holders could promote massive shares of BTC on the quantity weighted common value as contracts transfer nearer to expiring.
Near expiration nonetheless, they might promote the remaining Bitcoin, which causes the worth to drop, and leaving the brief place in the futures they shut “with a handsome profit.”
Lee additionally famous a low quantity of investment in crypto markets this 12 months, claiming that there’s extra internet provide this 12 months amid initial coin offerings (ICOs), mining rewards, and capital positive aspects taxes.
Crypto markets noticed a slight rebound right now, seeing gains of complete market cap of round $20 bln from Wednesday’s low of $271 bln. Having dropped as little as $6,263 this week, Bitcoin has seen a development of over 5 p.c in the 24-hour interval, and is buying and selling round $6,618 at press time.
Recently, Cointelegraph reported that US Commodity Futures Trading Commission (CFTC) has launched a probe into 4 main crypto exchanges Bitstamp, Coinbase, itBit, and Kraken which have been offering knowledge for CME Group, which launched Bitcoin futures buying and selling in December 2017. The CFTC is investigating whether or not these platforms have taken any motion that would represent manipulation of cryptocurrencies’ costs.