Hello my fellow blogger! CME futures expire today. How will this event affect the crypto market? Let’s dive in and investigate!
Source
Before we start discussing the effect on the price, let me define the term “CME futures” (as some people reading this maybe new to trading). The definition of futures is as follows:
CME’s Bitcoin futures contract, ticker symbol BTC, is a USD cash-settled contract based on the CME CF Bitcoin Reference Rate (BRR), which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. The BRR aggregates the trade flow of major bitcoin spot exchanges during a one-hour calculation window into the U.S. dollar price of one bitcoin as of 4 p.m. London Time.
Ok, is it still too complicated? Let me translate it from trading language to English. It is a contract that obligates parties to transact BTC at a predetermined future date and price. The contract is nominated in US dollar and expires today at 4 p.m. London Time. In other words, investors (mostly whales because of high entering price) will have to transact BTC today. To be in a good profit they need BTC price to be as low as possible. Historically we see the dump a few days before the expiration. See the chart below:
Source of chart data | Source of comments
The good side of it is that the dump is followed by a massive pump. Whales tend to push down BTC price until futures expire. When the pressure is lifted, BTC starts to grow fast. As you see, in 2021 the same pattern repeated itself again and again. This makes me think it will do so again. Actually, the first part of it – the dump of BTC price already happened. In a few hours we will see if the second part will do so as well.
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Disclaimer
I’m not a financial of any kind. I encourage you to check all information yourself and make decision only based on your own opinion. All articles are created for solely entertainment purpose.
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