Bitcoin Prices Fall as New Futures Contract Opens from CME on Monday
On Friday, CME was the host of $125 million worth of transactions involving bitcoin derivatives on Wednesday and Thursday last week, closing by Friday the 25th. Though Bitcoin price did not seem to fluctuate in the slightest, Monday brought different news. Just as the new futures contract with CME opened on Monday, Bitcoin and most altcoins dropped.
Bitcoin’s value lost about 10%. With $85 million traded on CME yesterday, the firm surpassed the performance of Coinbase, while passing the amount traded by Binance last week. This leaves experts to conclude that, considering the only difference being the new contract opening, the futures contract could have been responsible for the unfortunate change in Bitcoin’s price.
Tom Lee, a research analyst for Fundstrat Global, believes that the bitcoin futures are directly manipulating the crypto prices. Elaborating, he explained, “Bitcoin sees dramatic price changes around CBOE futures expirations. This was something flagged by Justin Saslaw at Raptor Group. We compiled some of the data and this indeed seems to be true. Overall, bitcoin has fallen 18 percent in the 10 days prior to CBOE contract expiration.”
Though there are many people that watch the way that futures perform on the market, they do not actually have any connection to bitcoin, considering that everything is settled with fiat currency. However, there are some Wall Street bankers that buy and sell bitcoin, so that futures prices can be impacted. Some analysts prefer to perform these actions on Gemini, since the volume is so low. Bots are set in motion to influence other exchanges, using the price created by Gemini transactions, though the writers at TrustNodes suggest that the connection is merely psychological.
Explaining other causes, TrustNodes states, “The other aspect is the artificial nature of these futures, which aren’t really futures at all. Actual futures require a locking in of the price and a delivery of the asset once the contract expires. Here there is no locking in, and no bitcoin is ever delivered, so creating an artificial market that might not have much to do with supply and demand.” To add to that point, institutional investors cannot purchase bitcoin as a hedge save, according to regulators.
Presently, the biggest roadblock to that point is how the Securities and Exchange Commission (SEC) has not given approval to any Bitcoin ETF yet, which has primarily been due to the potential for price manipulation. More specifically, since they are unable to track the transactions, there is no way to determine how much of the trading volume is due to manipulation. While this argument is outdated, considering the way that futures can now balance major volumes, the SEC has not created a market where institutional trading is permitted.
The only real alternative is Bakkt, since it will provide investors with bitcoin-settled regulated futures. Still, it is curious that the SEC has not come down on the platform to perform in investigation yet, considering the evidence that shows that CME could be involved in price manipulation.