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Bitcoin Price dropped by $157 million, recent CME expiry irrelevant

Photo of: Dennis Ramos
by Dennis Ramos

Bitcoin Futures expiry was a drab affair not just in terms of price impact but also the volumes. The open interest dropped by $157 million not moving much from its $85 billion mark. 

The Bitcoin futures contract with ticker symbol BTC is a USD cash settled-contract based on the CME CF Bitcoin Reference rate. The rate serves as a once-a-day reference rate of the US dollar price of Bitcoin. It aggregates the trade flow of major Bitcoin spot exchanges during a one-hour circulation window into the U.S. dollar prices. CME expires takes at every last trading Friday of each calendar month. 

Chicago Mercantile Exchange (CME) Bitcoin futures and options markets matured this Friday amidst trader fears the recent BTC dump is an augur of weakening markets. According to a September 2019 Cointelegraph and Arcane Research report, there is an average drop of 2.3% following each monthly CME expiry. 

Based on the 2019 September trends, the most recent CME Bitcoin futures expiry was irrelevant. August contracts worth $125 million were set to liquidate but preliminary reports suggested that less than $40 million were rolled over for the coming months. 

 Source: Bybt.com & CoinTelegraph

The chart above shows the change in total open interest change with inverse swaps and the remaining months in question in the last 24 hours. This is completely opposite to July’s expiry when $500 million worth of futures were liquidated. CME Bitcoin futures open interest is one of the ways to measure the event’s impact on investor expectations. The data does not assert if the investors were bullish or bearish at that time but when the open interest rate grows, it implies either significant positions or new investor entry. Halving has an important impact on both these reasons. 

Source: Skew

CME Bitcoin futures open interest grew by 186% to $390 million from November 2019 up to its May-11 halving. This means that institutional interest started picking up at the same time as a 40-hour change indicator began to regress the negative trend. 

The main reason we believe is because of the failure to establish support levels above $11,200 over the past weeks. Experts believed that based on the current macro-level factors, a positive medium to long term price cycle was on the anvil but the short term momentum will remain lackadaisical because of the consolidation. It may be disappointing to traders that Bitcoin lost its momentum but it does not indicate that the veteran investors have quit the scene. The volume could be low because bets might already have been placed earlier on. Hence investors should express a cause of concern only when the open interest rate diminishes especially in consolidation phases.

Following macro events such as the recent Jackson Hole conference, tight intraday moves between gold and Bitcoin could last for a couple of days. 

Source: trading view

The similarity in the intraday trades between gold and Bitcoin is quite evitable in this chart. But this does not necessarily imply that Bitcoin be viewed as a reserve asset like gold. It is just an indication that like the traditional markets, even the crypto markets are affected by external factors and events.