Bitcoin Futures are Causing BTC’s ‘Gut-Wrenching Decline’, Says Fundstrat Head
- Tom Lee believes that futures expirations are negatively affecting the price of BTC.
Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term bull and Fundstrat cofounder Tom Lee said last week that he sees a link between the expiration of Bitcoin futures and the cryptocurrency’s “gut-wrenching” decline. Bloomberg reported his remarks in a report published earlier this week.
More specifically, Lee said that the ‘significant Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term’ of the CBOE and CME futures have been ‘awful.’ He cited Justin Saslaw, who theorized that Bitcoin falls with impending expiration. There have been six expirations since the launch of CBOE’s Bitcoin futures; the most recent one happened on June 13.
Lee wrote that Bitcoin fell 18 percent during the ten-day period preceding the latest expiration.
Holders Sell Off to Increase Profits on Futures
According to Bloomberg, the reason for this is 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.” However, the holder may sell their remaining BTC to cause a drop in price, which will, in turn, cause the short position in the futures to close in a more profitable position.
Lee added that low inflows of capital into the crypto market this year may be negatively affecting the price of BTC, despite the fact that this year, the number of ICOs has grown and mining rewards are up. He also cited a lack of clear, appropriate regulations for the crypto space as a hindrance to the industry.
Lee’s remarks stand in contrast to predictions he made in February when he said that Bitcoin would soar to record heights in July. In a note to a client, Lee wrote that “73% of bitcoin bottoms are V-shaped. This recent 70% decline is severe," but "we can see a case for bitcoin’s resilience here given the sharpness of the recent decline." He cited data collected from prior crashes in Bitcoin’s price.
However, the Bitcoin markets have experienced an influx of entirely new kinds of investments. Market patterns that applied in the past may have been rendered obsolete by the changing culture of BTC--only time will tell.
Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term bull and Fundstrat cofounder Tom Lee said last week that he sees a link between the expiration of Bitcoin futures and the cryptocurrency’s “gut-wrenching” decline. Bloomberg reported his remarks in a report published earlier this week.
More specifically, Lee said that the ‘significant Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term’ of the CBOE and CME futures have been ‘awful.’ He cited Justin Saslaw, who theorized that Bitcoin falls with impending expiration. There have been six expirations since the launch of CBOE’s Bitcoin futures; the most recent one happened on June 13.
Lee wrote that Bitcoin fell 18 percent during the ten-day period preceding the latest expiration.
Holders Sell Off to Increase Profits on Futures
According to Bloomberg, the reason for this is 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.” However, the holder may sell their remaining BTC to cause a drop in price, which will, in turn, cause the short position in the futures to close in a more profitable position.
Lee added that low inflows of capital into the crypto market this year may be negatively affecting the price of BTC, despite the fact that this year, the number of ICOs has grown and mining rewards are up. He also cited a lack of clear, appropriate regulations for the crypto space as a hindrance to the industry.
Lee’s remarks stand in contrast to predictions he made in February when he said that Bitcoin would soar to record heights in July. In a note to a client, Lee wrote that “73% of bitcoin bottoms are V-shaped. This recent 70% decline is severe," but "we can see a case for bitcoin’s resilience here given the sharpness of the recent decline." He cited data collected from prior crashes in Bitcoin’s price.
However, the Bitcoin markets have experienced an influx of entirely new kinds of investments. Market patterns that applied in the past may have been rendered obsolete by the changing culture of BTC--only time will tell.