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The CME BTC futures expire on Friday – Will Bitcoin rise or fall?

  • This Friday the Bitcoin Futures of the Chicago Mercantile Exchange (CME) will expire again. The signs of how the Bitcoin price will react this time are not clear.
  • Meanwhile, the former chairman of the US futures and options market authority has admitted that the BTC futures on the CME and CBOE were approved in December 2017 to burst the Bitcoin bubble. 

Once again, the last Friday of the month is approaching. For Bitcoin investors, this means that the Bitcoin futures on the Chicago Mercantile Exchange (CME) will expire on Friday. The futures contracts first issued by the CME in December 2017 are suspected of significantly affecting the Bitcoin price. As CNF recently reported, Arcane Research has published a study confirming this hypothesis.

Of the first 20 months that the CME Bitcoin futures were issued, Bitcoin lost in value in 15 out of 20 cases (75 percent) approximately 1.5 days before expiry. The study showed that since January 2018 Bitcoin has tended to decline by an average of 2.27 percent with increasing monthly settlement. Adjusted for “large outliers”, the rate is 1.99 percent. It was not the case that there were more days with losses than profits in the period under review. In this period, the days on which Bitcoin rose or fell were the same.

Based on this, Arcane Research assumed a manipulation of the Bitcoin price, which is made possible by the fact that the CME Bitcoin futures are settled in US dollars and not in Bitcoin as with Bakkt. According to Bendikt Norheim Schei, analyst at Arcane Research, the relationship is no coincidence:

Statistically, it is highly unlikely that the fall in prices before the CME settlement should be caused by chance.

Will Bitcoin fall again this time?

The Bitcoin price is currently recording a price drop of around 2.9% (at the time of writing) and is thus at USD 8,016. However, the projections are not so clear this time because the volume of the futures has dropped significantly from approx. 500 million dollars or more to approx. 150 million dollars per day. In addition, the Bitcoin price has moved sideways since the futures last expired on September 24th, when there was a massive crash. Normally, the prices rose after the futures expired.

In addition, Skew Markets presented new market data yesterday. These show that the value of institutional investors’ long positions rose from below 500 BTC ($4.11 million) on October 1st to over 1,000 BTC ($8.23 million) on October 16th. Pension funds, foundations, insurance companies, mutual funds and portfolio and investment managers more than doubled the value of their long positions in Bitcoin (BTC) futures this month.

US government caused the Bitcoin bubble to burst in 2017

In a recent Coindesk article, former chairman of the U.S. Commodity Futures Trading Commission (CFTC) Christopher Giancarlo confirmed the influence of cash-based Bitcoin futures on the cryptocurrency market. Giancarlo explained that the Trump administration had approved the cash-based Bitcoin futures on the CME and Chicago Board Options Exchange (CBOE) to burst the 2017 Bitcoin bubble when BTC reached its all-time high of $20,000.

In an interview with Coindesk, Giancarlo said:

One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of Bitcoin futures would have the impact of popping the Bitcoin bubble. And it worked.

In a speech at the Pantera summit on Monday in San Francisco, Giancarlo added

We saw a bubble building and we thought the best way to address it was to allow the market to interact with it […]

The CFTC staff handled it strictly on procedural grounds, but at the leadership level I communicated with Treasury Secretary [Steven] Mnuchin and NEC Director Gary Cohn, and we believed that, should Bitcoin futures go forward, it would allow institutional money to bring discipline to the value of the cash market.

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About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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