Bitcoin price crashed 20% this week, which is likely to be driven by the Intercontinental Exchange Inc.’s new futures contracts Bakkt, according to JPMorgan Chase & Co.
Last weekend, Bakkt was launched with physically delivered daily and monthly Bitcoin futures contracts for institutional investors.
Bitcoin, that was trading around $10,000 before the Bakkt launch dropped to $7,733, this week.
Though Bakkt’s launch JPMorgan strategists led by Nikolaos Panigirtzoglou said was a further step to maturity for the cryptocurrency market because of the introduction of physically delivered BTC futures, this could be the reason why the price of the crypto asset tumbled.
“It may be that the listing of physically settled futures contracts (that enables some holders of physical Bitcoin e.g. miners to hedge exposures) has contributed to recent price declines, rather than the low initial volumes,” JPMorgan said in a report on Friday.
Bakkt saw a meager 72 BTC volume in the first 24 hours of its launch that crypto market watchers cited to be a likely contributor to this week’s drop.
Another reason could also be the concern about difficulty getting approval for Bitcoin-related exchange-traded funds (ETF) from the US Securities and Exchange Commission (SEC).
Panigirtzoglou and colleagues further noted that Bitcoin price peaks coincide with overbought conditions.
Moreover, the long base in CME contracts also appears to have fallen “markedly,” from its peak, a few months ago.
The Bitmex position proxy further suggests a “more marked capitulation” of BTC longs over the past week, they said.
A report by CryptoQuant also stated that the $700 million worth of contracts liquidated on BitMEX was behind this decline.
“This position liquidation has also likely contributed to the sharp falls in Bitcoin prices this week,” the strategists of JPMorgan said.
“While the previous overhang of long Bitcoin futures positions appears to have cleared in Bitmex futures, this is not yet true for CME contracts.”