Bitcoin price is seeing a serious drop of about 9 percent yet again as it falls to $3,950 at the time of reporting. It is possible this fall is caused by CME Bitcoin futures contracts that are expiring today.
CME Bitcoin Futures’ Contracts Expire
As it happens, CME Bitcoin Futures contracts are expiring on the last Friday of every month i.e. today. For the contract month of November 2018, the product code BTCX18’s first trade has been on September 2018 and last trade on November 30, 2018.
As for the timing, it says on CME website,
“Termination of Trading: Last Day of Trading is the last Friday of contract month. Trading in expiring futures terminates at 4:00 p.m. London time on Last Day of Trading.
And as happens with this termination day, the bitcoin prices take a hit. In the past, a pattern has emerged where with futures expiration, the prices take a drop with a few exceptions like in February.
Back in May Fundstrat’s Tom Lee had explained the connection between the two with,
“If a trader is long Bitcoin and short the futures, as contracts move closer to expiry, holders may sell a large share of the coins at volume weighted average price (VWAP) to minimize tracking error. But near expiration, may sell the remaining Bitcoin, causing the price to drop, leaving the short position in the futures to close with a handsome profit.”
Bitcoin Price takes another Fall
Looks like Bitcoin is yet again shorted. After seeing greens for the past two days making the highest recovery of about 3 months with over 12 percent gains, today bitcoin dropped down.
At the time of writing, Bitcoin has been trading at $3,950 with 24-hours losses of about 9 percent. The leading cryptocurrency has a market cap of $70 billion while managing the daily trading volume of more than $6 billion.
Bitcoin 3-days price chart, Source: Coinmarketcap
However, this time price has already been dropping for about a fortnight and experts and analysts have been expecting a further drop in Bitcoin prices with chances of seeing $3k and even $1k.
Venture Capitalist, Fred Wilson had also shared,
“So while crypto asset prices are down 80-95% in USD terms over the last year, they could and probably will go lower.”
He further continued,
“I think some crypto asset (and possibly a number of crypto assets) will have a price chart like Amazon’s current one in 18 years. But we will have to do what Amazon did, hunker down and build value and survive, for quite a while to get there. And I think things will get worse before they get better.”
However, the greens in the last couple of days had infused some hope in the market. So, it is yet to be seen if this price drop is a cause of Bitcoin futures expiration and will end with this or will finally see the $3K as predicted.