Data shows the ‘Bitcoin price drops ahead of CME expiries’ claim is a myth

Many traders believe the narrative that Bitcoin price drops ahead of CME BTC futures expiries, but data shows the trend is all bark and no bite.

Historically, activity surrounding the Bitcoin (BTC) monthly futures and options expiry has been blamed for weakening bullish momentum. A few studies from 2019 found a 2.3% average drop in BTC price 40 hours before the CME futures settlement date. 

However, as Cointelegraph reported in June 2020, the effect faded away. While 2020 seems to have rejected the potential negative impact of CME expiries, so far, the current year appears to validate the theory. Bitcoin’s price has been suppressed ahead of futures and options expiry in the first three months of 2021.

Bitcoin performance before and after CME expiry, USD. Source: TradingView

Some investors and traders have pointed out that Bitcoin’s incredible rally after the recent futures and options expiry dates has become a trend.

BTC has effectively rallied in the days following the expiry, but expanding this analysis uncovers a less-than-satisfactory trend.

Three consecutive events don’t prove a trend

The past 13 months have been nothing short of spectacular for Bitcoin, as the cryptocurrency posted 788% gains. August 2020 turned out to be the worst month, as BTC presented a 7.5% negative performance. Thus, choosing random starting points within the month will likely show a similar positive trend.

For example, if one uses the “last quarter” moon phase as a proxy, the odds that a rally takes place after each event are very high.

Bitcoin performance after “Last Quarter” moon, USD. Source: TradingView

As depicted above, indeed, Bitcoin rallied after five out of the last six instances. The only conclusion might be that positive trends are the norm rather than the exception during bull runs.

Although there might be some explanation to the reason behind Bitcoin’s end-of-the-month underperformance, these are only hypotheses.

While market makers and arbitrage desks could benefit from suppressing the price after a rally, other forces, including leverage futures longs and call option holders, would balance that out.

Bitcoin price did not drop in three of the last seven expiries

Therefore, it makes sense to analyze the potential price suppression ahead of the expiry instead of looking for explanations for a rally during a bull market.

Bitcoin performance before and after CME expiry in 2020, USD. Source: TradingView

Both October and December 2020 expiries failed to present any negative pressure ahead of such dates. Meanwhile, the 12% positive performance on the five days that preceded the most recent April 30 expiry also puts a big question mark on how meaningful the CME event really is.

Considering there hasn’t been a price decrease ahead of monthly futures and options expiries in three of the last seven instances, this evidence should put a nail in the coffin of the unfounded myth.

As mentioned earlier, trying to develop theories on why sellers acted more aggressively on specific dates is unlikely to yield results.

As shown above, Bitcoin’s price failed to underperform in three out of the last seven expiries. A 57% success rate should not define a trend when a positive performance after a specific date has been proven common during a bull run.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin bears have a $340M lead heading into Friday’s BTC options expiry

$1.55 billion in Bitcoin options are set to expire on April 23 and the recent BTC crash to $51,000 has given bears a $340 million advantage.

Bitcoin (BTC) price is making a slow recovery after facing a sharp 16% correction in the early hours of April 18.

While some analysts blame a 9,000 BTC deposit at Binance, others focused on the hashrate drop caused by a coal mining accident in China. Regardless of the reason behind the $51,200 low, options market makers were forced to adjust their exposure.

Typically, arbitrage desks seek non-directional exposure, meaning they are not directly betting on BTC moving in any particular direction. However, neutralizing options exposure usually requires a dynamic hedge, meaning positions must be adjusted according to Bitcoin’s price.

These arbitrage desks’ risk adjustments usually involve selling BTC when the market drops, which as a result, adds further pressure to long liquidations. Therefore, it makes sense to understand the current level of risk as the April 23 options expiry approaches. We will attempt to dissect whether or not bears will benefit from a $50,000 BTC price.

The initial outlook seems balanced

Before the April 18 correction, BTC accumulated 74% gains in three months as it marked a $64,900 all-time high. Thus, it is natural for investors to approach protective options more heavily.

Bitcoin April 23 aggregate options. Source: Bybt

While the neutral-to-bullish call (buy) option provides the buyer with upside price protection, the opposite happens with the more bearish put (sell) options. By measuring each price level’s risk exposure, traders can gain insight into how bullish or bearish traders are positioned.

The total number of contracts set to expire on April 23 totals 27,320 BTC, which is $1.55 billion at the current $56,500 price. However, bears and bulls are apparently balanced as the call (buy) options total 45% of the open interest.

Bears have a decent advantage after the recent crash

While the initial picture seems neutral, one must consider that the $64,000 call (buy) and higher options are almost worthless, with less than three days left before expiry. A more bearish situation emerges when these 6,400 bullish contracts currently trading below $50 each are removed.

The neutral-to-bearish put options dominate with 70% of the remaining 19,930 BTC contracts. The open interest stands at $1.13 billion considering the current Bitcoin price, and this gives the bears a $450 million advantage.

One can see that bulls were caught off-guard as Bitcoin retraced 13% after the April 14 all-time high. A meager 3,000 BTC call options are left below $58,000, which is only 24% of the total.

Meanwhile, the neutral-to-bearish put options amount to 9,000 BTC contracts at $55,000 and higher strikes. This difference represents a $340 million open interest that favors bears.

As things currently stand, the expiries between $57,000 and $64,000 are reasonably balanced, which suggests that the bears have an incentive to keep the price down on April 23.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Goldman Sachs Sees Bitcoin Market Becoming More Mature

Goldman Sachs Sees Bitcoin Market Becoming More MatureGoldman Sachs’ global head of commodities research sees the bitcoin market becoming more mature. “The key to creating some type of stability in the market is to see an increase in the participation of institutional investors,” he detailed. Meanwhile, the price of the cryptocurrency soared on Thursday, regaining much of the losses from the beginning […]
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Bitcoin whales are buying more aggressively since Christmas, data finds

High-net-worth investors, or whales, have been buying Bitcoin more aggressively since Christmas, on-chain data show.

Bitcoin (BTC) whales have been buying more since Christmas, on-chain data shows. This indicates that high-net-worth investors are continuing to eat up the supply of BTC.

It is nearly impossible to segregate institutional investors from individual investors through on-chain data. However, the trend shows that investors with large capital are increasingly entering into the Bitcoin market despite its rally.

Bitcoin large supply holders. Source: Santiment

Why are whales continuing to buy more Bitcoin?

According to the analysts at Santiment, around $647 million worth of Bitcoin likely transferred from small addresses to large addresses.

Addresses holding over 1,000 BTC or more are considered whales by many analysts, as 1,000 BTC is equivalent to over $27 million at the current price at $27,100. The analysts wrote:

“Over the last 48 hours since Christmas, #Bitcoin addresses with 1,000 or more $BTC now own 0.13% more of the supply that smaller addresses did previously. This is about 24,158 tokens, which translates to $647.7M at the time of this writing.”

Bitcoin has increased nearly threefold since mid-2020, and the upside for BTC is arguably limited in the near future.

Still, most on-chain data points show that fewer whales are selling across major exchanges. Ki Young Ju, CEO at CryptoQuant, said:

“BTC whales seem exhausted to sell. Fewer whales are depositing to exchanges. I think this bull-run will continue as institutional investors keep buying and Exchange Whale Ratio keeps below 85%.”

Bitcoin Exchange Whale Ratio. Source: CryptoQuant

There are two main reasons why whales might be accumulating Bitcoin at the current price range.

First, in spite of Bitcoin’s overextended rally, whales might believe that the psychological barrier at $30,000 will break. If so, options data suggests $36,000 could be a likely target in the near term.

Second, there is no solid reason to anticipate a major correction coming, apart from the CME gap and the high futures market funding rate.

But if Bitcoin consolidates after each rally, as seen in the past two days, then the funding rate would likely normalize. When that happens, the derivatives market would be less overheated, raising the probability of a new rally.

A pseudonymous trader known as “Byzantine General” said that the market is currently giving conflicting signals. Both long and short contract holders are being aggressive, which makes both a long and short squeeze possible. He said:

“Such conflicting signals rn. Both longs & shorts are being overly aggressive lol. I should probably sit on my hands.”

The likely near-term scenario is more consolidation

Typically, the price of Bitcoin on Coinbase is higher than Binance and other Tether-reliant exchanges. However, in the past week, Bitcoin has been trading slightly lower on Coinbase, by around $20 to $30.

Although the gap is small, it shows that the U.S., which drove Bitcoin’s rally throughout December, might be seeing slowing buyer demand. But the Asian market and the derivatives market are seeing an increase in buyer demand.

Considering that the demand for Bitcoin in the U.S. spot market appears to be cooling down, Bitcoin could consolidate for longer with lower volatility.

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Zero to $318,000: Proponents and Detractors Give a Variety of Bitcoin Price Predictions for 2021

Zero to $318,000: Proponents and Detractors Give a Variety of Bitcoin Price Predictions for 2021While bitcoin has jumped well above the $26,000 zone, a number of crypto proponents are extremely bullish for the crypto asset’s performance in 2021. During the last year, a number of pundits, experts, luminaries, and speculators have predicted bitcoin’s 2021 value after the digital currency has experienced a phenomenal year in 2020. 2021 Bitcoin Price […]

The post Zero to $318,000: Proponents and Detractors Give a Variety of Bitcoin Price Predictions for 2021 appeared first on Bitcoin News.

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