Optimists or anxious, Bitcoin traders are doubtlessly sitting tight, refreshing Tradingview and Bitmex pages. However this week, they might be having their eyes on a different kind of graph.
In fact, on Friday 27th of July, bitcoin futures contracts conducted by CME Group are expected to expire. Similar contracts are considered to be a sort of financial facility that enables institutions and professional traders to short or long the crypto asset; in other words, bet on its future performance:
-Historical data depicts that bitcoin’s price declines by 7.89% on average five days before contract expiration.
-Analytical data suggests that such an event could generate a healthy fallback in the overall crypto prices.
Even though there are other factors in favor of the widespread adoption of bitcoin investment, and bitcoin futures market is definitely one of them : A great proof of that is the tweet recently shared by the CME Group which stated that their bitcoin futures product was up 93 % in volume and 58 % in open interest in the second trimester.
Moreover, CME futures continued to substantially grow into the third trimester: A large number of contracts set was witnessed this Tuesday, resulting in 64,390 bitcoins with a nominal value of $530 million.
Although numbers look promising in terms of bitcoin’s overall investment, we shouldn’t be looking through rose-colored glasses for too long because bitcoin futures can negatively impact prices. How?
Before its introduction, there were few options for traditional investors to short the market, and this particular investment type has accomplished just that, “allowing bears to speculate alongside the bulls”.
On the other hand, Bitcoin prices strongly rallied over the last few weeks reaching a trading price of $ 8,182: An increase of 41% in less than a month, according to Bitcoin Price Index analysis: and so, this striking turn of event has led to overextended technical charts, including the highest daily RSI level since December, which could give rise to another drastic boom.
Bringing up the rear, we believe that it wasn’t exactly a coincidence that Bitcoin reached its all-time high of $19,891 (on Bitfinex) on Dec 17th, 2017, the exact day CME introduced their first bitcoin futures product. Price has been steadily declining ever since and figures currently reflect a 58% depreciation from the high mark of December.
What to expect?
We shouldn’t be very surprised when prices drop in the near future, but we should definitely wait for a bullish glory of cryptocurrencies in the long term.