Thomas Lee, head of research at Fundstrat Global Advisors put forward his own version of why the world’s most popular cryptocurrency has been on the downward spiral recently. According to him, the BTC price decline was caused by the expiration of bitcoin futures.
Mr. Lee claimed that Fundstrat has seen “significant volatility” around soon-to-expire bitcoin futures on Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE). In addition to that, the overall sentiment and technical factors have also been described as “awful”.
In his market report, released on Thursday, Lee cited a theory by Justin Saslaw on bitcoin expiration. Mr. Saslaw discovered that ever since the CBOE bitcoin futures launched at the end of 2017, there have been six expirations, including the latest one on June 13th.
In the 10 days preceding the expiration, the BTC price has dipped by 18% on average, before going on to recover approximately six days after the expiration. Thus, based on this theory we can expect the crypto markets to be in the green for the next couple of days at least.
Mr. Lee went on to explain the price movement in more detail, saying that, “If a trader is long Bitcoin and short the futures, as contracts move closer to expiry, holders may sell a large share of the coins at volume weighted average price (VWAP) to minimize tracking error. But near expiration, may sell the remaining Bitcoin, causing the price to drop, leaving the short position in the futures to close with a handsome profit.”
Of course, futures expiration is not the only factor behind the sharp drop of the BTC price, alongside most other virtual currencies. Other reasons might include Coinrail exchange hack, a recent study, claiming that Tether manipulated BTC prices and investigation into bitcoin futures price manipulation by four major crypto exchanges.
Mr. Lee also distinguished a low influx of investment in crypto markets this year, as the long-awaited institutional money is still not being invested in virtual currencies due to slow progress on creating appropriate tools and universal regulation.
After a prolonged slump, bitcoin has finally rebounded or at least stabilized, having dropped to the lows of $6263 earlier this week. In the past 24 hours, BTC gained over 2 percent and is trading around $6600 at press time. The whole crypto market cap increased by around $15 billion, from the Wednesday’s low of $271 bln.
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