Cindicator Study: Bitcoin Futures Contract Expirations and BTC Price Drops Are Uncorrelated


New Cindicator Study Reveals Bitcoin and Futures Contracts Expiry Are Uncorrelated

A new finding called, “Bitcoin Futures: Market Revolution”, looked at the relationship between bitcoin volumes of futures and crypto exchanges to see the trends in liquidity. The entirety of the study, as reported by CCN, dealt with taking the positions held by institutional investors and putting that on the same scale as future expires.

The reason for such comparison stemmed from the assumption that future markets are insufficient when comparing their volume to the spot market. Cindicator researchers explained why they decided against tracking bitcoin price action every time an expiry took place as being due to:

“Arbitrageurs trying to gain from differences between futures and spot prices that can be produced by lower liquidity and/or differing demand and supply dynamics of futures and spot investors.”

A Look at the First Expiry In terms of CBOE and CME Futures

In December 2017, CBOE and CME were the ones to have launched the first of the bitcoin futures, which supposedly took place at the same time. Turns out, the findings indicated a similar bitcoin price pattern as the expiration neared. As worded by CCN, “the price dropped before each fix and started increasing afterward.”

The team of researchers argued this to being reasonable because of the fact that the launched futures were the first of its kind and the potential “pump-and-dump” that took place.

One would assume that similar trends were witnessed as the number of expires increased. In reality, the relevance decreased, which implies that there is no significant correlation between bitcoin futures expiry and token price (i.e. both variables under consideration are independent).

In particular, the bitcoin price that fell with every expiry failed to pick back up like that from the first expiry, which made the researchers conclude that such a relationship no longer holds.

Commenting on the findings is Cindicator’s Head of Analytics, Simon Keusen, who shared that there is no particular trend or set guidelines when it comes to “trading based on futures expiration dates,” adding that assessing the entire market is the best way to go about it.

Keusen also noted that the findings are a “good representation of the overall value” delivered to crypto investors, that is, showing investors of the different movements one can expect within the market, as there are various.

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