Trading is arrogant, be it on Wall Street or across crypto exchanges. In order to trade rather than hodl, you must fundamentally believe you’re smarter, more disciplined or better informed than the other half of the market. Time will tell. But as long as you’re trading, we’ve established that you’re at least more arrogant than the other half of the market. Bitcoin is arrogant. In order to be a bitcoiner, you must fundamentally believe that a bunch of software engineers can create a better form of money than economists, governments and central banks.
Also read: Why Do We Fall, Bruce?
Wall Street Manipulation and Willy Bot
If you are a bitcoin trader (rather than just a hodler) you must be really smart. Or at least you must think you are really smart. A common trait I see in bitcoin traders is that they have theories for everything. They see through it all; the Mt.Gox “Willy bot” bubble, the Chinese wash trading, the Chinese government insider trading, the stop-hunting, Spoofy, Tether & Jamie Dimon trying to buy up cheap bitcoin. The latest conspiracy: Wall Street shorting futures and manipulating spot prices near settlement.
I’m not saying that these theories aren’t sometimes correct. The Willy bot really did exist, and Chinese volumes dropped 90% after zero fee trading was banned. What’s important is that regardless if they’re correct or not, these theories become significant drivers in the bitcoin price. Many times, they create the price movement they are afraid of, like a Harry Potter boggart. This week, either Wall Street drove spot exchanges prices downwards in an act of manipulation, or it was the traders who thought Wall Street would do that did.
The CME and Cboe are traditional financial marketplaces where institutional traders (“Wall Street”) have been able trade bitcoin futures contracts since December. A futures contract is a contract to trade a certain thing for a certain price at a certain time. The Cboe and the CME futures contracts are cash-settled, so what is traded in practice is the price difference between what one entered the contract at vs. the “real” price at the time of settlement.
The first batch of Cboe bitcoin futures settled on Jan 17. The first batch of CME bitcoin futures settled on Jan 26. Futures contract entry prices are negotiated on the Cboe & CME exchanges themselves, but the “real” price at settlement is determined by the spot exchanges. For Cboe, it’s determined by a Gemini auction, and for CME, it’s a composite of Bitstamp, GDAX, Itbit and Kraken.
What the Market Believes
From the Gemini auction data page we can see that the volume for the particular auction (Jan 17) setting the price for the Cboe futures was ~6.72 million USD.
So, What is Your Trading Tip Exactly?
I believe we are about to break out from an extended period of consolidation. I’ve been hoping to get in some long positions from ~$8k, but it appears to me that we would have gotten there thanks to the CME futures FUD if $8k was really going to happen. As the market runs out of paranoia, I expect us to start a Lightning Network-positivity-fueled recovery to ~$13000-14000 in the coming weeks.
I’m opening a medium-sized long position (saving some of my trading balance in case we do get a chance at ~$8k). As usual, I timestamp my trades on Twitter for transparency so there can be no post-editing until this article is processed by Bitcoin.com.