[2018-06-15] Thomas Lee: Weakness in Bitcoin Is Caused by Futures Expiration

[Terraformer]

According to Fundstrat head of research Thomas Lee, the recent decline in Bitcoin (BTC) price is likely the result of the expiration of Bitcoin futures, Bloomberg reports June 14.

In a report, Lee explained that the “gut wrenching” weakness in Bitcoin (BTC), which dropped upwards of 20 percent earlier this week, was the result of futures contracts expiring. Lee said the “significant volatility” is one of six expirations of Bitcoin that have happened since CBOE launched its futures contracts in December 2017. Lee wrote:

"Bitcoin sees dramatic price changes around CBOE futures expirations... We compiled some of the data and this indeed seems to be true.”

According to Lee, Bitcoin usually sees a drop of around 18 percent in 10 days before futures expiration, with prices generally recovering by six days afterward. Lee explained that if a trader is long on Bitcoin and short the futures, holders may sell large shares of BTC at the volume weighted average price as contracts move closer to expiring.

Near expiration however, they may sell the remaining Bitcoin, which causes the price to drop, and leaving the short position in the futures they close “with a handsome profit.”

Lee also noted a low amount of investment in crypto markets this year, claiming that there’s more net supply this year amid initial coin offerings (ICOs), mining rewards, and capital gains taxes.

Crypto markets saw a slight rebound today, seeing gains of total market cap of around $20 bln from Wednesday’s low of $271 bln. Having dropped as low as $6,263 this week, Bitcoin has seen a growth of over 5 percent in the 24-hour period, and is trading around $6,618 at press time.

Recently, Cointelegraph reported that US Commodity Futures Trading Commission (CFTC) has launched a probe into four major crypto exchanges Bitstamp, Coinbase, itBit, and Kraken that have been providing data for CME Group, which launched Bitcoin futures trading in December 2017. The CFTC is investigating whether these platforms have taken any action that could constitute manipulation of cryptocurrencies’ prices.

Source >> https://cointelegraph.com/news/fundstrat-s-thomas-lee-weakness-in-bitcoin-is-caused-by-futures-expiration

[Slow death]

Well, analysts are a lot active lately and I suppose they're active because the price is dropping every day and it's not showing signs of recovering back to $ 17000 and how they (the analysts) shouted all over the internet that bitcoin would to reach $40,000 by 2018 and this has encouraged many people to buy bitcoin when the price was more than $16000 so now analysts are running out of time and should look for reasons for this price drop under penalty of them (analysts) destroy their reputations of experts.

[1Referee]

Bitcoin doesn't have a weakness. The only weakness, which relates to this entire market, is how stupid most of the people in the crypto ecosystem are.

If people weren't blinded by greed, we wouldn't have coins doing absolutely nothing be worth billions, and the ICO hype wouldn't be as bad as it is today.

If people were actually interested in the technological engineering of coins, they wouldn't focus on Bitcoin to move up or down.

The futures have zero impact on the market. It's Bitcoin up or down > futures react. Not vice versa. Also, future contracts are mostly being settled by parties not knowing anything about this market. Most well thinking crypto people know more than them about this market. It doesn't mean they will never become a vital part of Bitcoin's market, but at this point they aren't.

I am more inclined to think that platforms as BitMex have more impact on the market than anything else. It's a quick fix whales are after, especially when the market isn't doing anything.

[odolvlobo]

I'm not convinced. The Bitcoin futures market is small. I'm not an expert, but it seems to me that it would cost more money to drive the price down 18% than would be gained by the investment in futures.

[stomachgrowls]

Bitcoin doesn't have a weakness. The only weakness, which relates to this entire market, is how stupid most of the people in the crypto ecosystem are.

If people weren't blinded by greed, we wouldn't have coins doing absolutely nothing be worth billions, and the ICO hype wouldn't be as bad as it is today.

If people were actually interested in the technological engineering of coins, they wouldn't focus on Bitcoin to move up or down.

The futures have zero impact on the market. It's Bitcoin up or down > futures react. Not vice versa. Also, future contracts are mostly being settled by parties not knowing anything about this market. Most well thinking crypto people know more than them about this market. It doesn't mean they will never become a vital part of Bitcoin's market, but at this point they aren't.

I am more inclined to think that platforms as BitMex have more impact on the market than anything else. It's a quick fix whales are after, especially when the market isn't doing anything.

We do really had those "If's" but greediness is the thing that cant really be taken out of a certain person or investor. We can blame out people but we cant do anything about it but to see on how the price crash. Futures doesnt really have any correlation with Cryptocurrency market i dont know why they are trying to tying it up.
People do have difference on insights but im 100% sure most of us are on really keeping an eye on moving prices because we do know this is the thing that can make us money.

[darkangel11]

I'm not convinced. The Bitcoin futures market is small. I'm not an expert, but it seems to me that it would cost more money to drive the price down 18% than would be gained by the investment in futures.

If we take a look into the market when the futures were announced (late 2017) and opened (while the price of BTC was hitting double top near 20k USD) you can already see a pattern. The announcement was somewhere around 5000 USD point and many people bought into the hype at that point. When futures trading opened the same people, who were holders of BTC, shorted and sold their coins in hope that it will increase the market supply. They doubled the money and won on both markets. It was a perfect move, I give them that. 

[Kakmakr]

I'm not convinced. The Bitcoin futures market is small. I'm not an expert, but it seems to me that it would cost more money to drive the price down 18% than would be gained by the investment in futures.

This was my initial thoughts too, but I am not so sure about this anymore. These guys know how to game the system and they will never risk more than they will lose. I think the SEC investigations might shed some light on the levels of manipulation that are going on in the USA Future market soon.

I actually want them to expose the people behind this manipulation, so that we can finally know if it is whales or Wall Street types.  

[richardsNY]

Thomas Lee is definitely in here for the attention. His predictions are utter nonsense as the market keeps working against him, and now he's looking to score an easy goal by stating something that might or might not be the case. In the end it doesn't even matter where the manipulation came from, it happened and the majority of the people see last year's pump as fake. Smart people cashed out on time and are buying back their coins on the way down, while newbies are stuck holding coins being worth $10,000 more than current levels. As long as people are holding their coins they haven't lost anything....

[Reatim]

I'm not convinced. The Bitcoin futures market is small. I'm not an expert, but it seems to me that it would cost more money to drive the price down 18% than would be gained by the investment in futures.

This was my initial thoughts too, but I am not so sure about this anymore. These guys know how to game the system and they will never risk more than they will lose. I think the SEC investigations might shed some light on the levels of manipulation that are going on in the USA Future market soon.

I actually want them to expose the people behind this manipulation, so that we can finally know if it is whales or Wall Street types.  

For me the bitcoin future contracts may have somewhat dampen the interest of most investors though. They caused the needed hype that push the price to almost $20K, but they could have somewhat triggered as well this bear market.

I still remember that when they entered the market suddenly went into being "stable", however, that's obvious reason to think that something might have drastically change the landscape because after that we all know what happens to the market.

[vit05]

Future contracts do not need so much volatility. I do not understand why they continue with these reports. And the main futures contracts are dollar operations. These people make money talking nonsense.

[BitHodler]

For me the bitcoin future contracts may have somewhat dampen the interest of most investors though.

Nah. People and the more seasoned traders aren't disturbed by the futures.

People don't even know what futures are, which means that it completely operates beyond their small vision field, while seasoned traders don't take futures serious because of their volumes.

CME had a $83,000,000 volume on Friday, where the trade history points out smaller contract entry points per time. I think it's more likely that those trading future contracts are more afraid of Bitcoin than vice versa.

It's going to be interesting when we'll be seeing the first asset backed ETFs show up. This is where we for the first time will see a financial tool that will actually affect the market significantly.

[jjacob]

It's going to be interesting when we'll be seeing the first asset backed ETFs show up. This is where we for the first time will see a financial tool that will actually affect the market significantly.

If we actually get ETFs in place for Bitcoin, it will be a big positive for the bulls. It would make buying easier for common Joe on the street.
Futures, on the other hand, actually help those who want to take leveraged long and short positions. They haven't really become ubiquitous for us to conclude that they are the cause of the price decline.

[1Referee]

If we actually get ETFs in place for Bitcoin, it will be a big positive for the bulls. It would make buying easier for common Joe on the street.

It's definitely an extremely bullish indicator, but the deal with these ETF's, at least from the position of US regulators, is that regulators don't want average joes to enter. It's not for nothing that VanEck and SolidX had to make sure that an initial issue price of $200,000 has to be in place. Even the CID (Coinbase Index Fund) has an issue price of at least $250,000. US regulators just don't want to expose average joes to Bitcoin and crypto in this way.

They have no problems seeing institutions throwing in potentially billions, but some retail pocket change is a big deal apparantly. It perhaps comes down to how institutions are more capable of properly calculating the risks that are tied to this market. One way or another, there has to be some sort of a reason. At least, the exclusion of average joes make it 100x more likely that VanEck and SolidX will have their ETF approved.