Bitcoin, (BTCUSD) LaSalle Street Professionals are in Charge
$BTCUSD, $CME, $CBOE
Last last year when they were introduced, Bitcoin futures were expected to boost prices and demand for the cryptocurrency.
Analysts are now suggesting otherwise.
According to a recent report from well-known crypto markets analyst Tom Lee, Bitcoin futures are the cause of “gut wrenching” weakness in the cryptocurrency’s price.
Specifically, Bitcoin prices demonstrate downward volatility around the expiration date of futures contracts as professional traders, who are long on Bitcoin and short its futures contracts, sell their Bitcoin holdings to generate “a handsome profit” for their futures bet.
Mr. Lee calculated that Bitcoin’s price has fallen by an average of 18% during the 10 days before contracts expire. It begins recovery from the 6th day onwards after contracts expire.
The current situation is further exacerbated by 2 factors.
- The “awful” sentiment and technicals for Bitcoin and cryptocurrencies as regulatory agencies crack down on cryptocurrencies.
- The absence of sufficient liquidity to stem the effect of a large selloff. Noting that there has been “slow progress” by institutional investors to create channels for crypto investment.
Previous analysis of Bitcoin futures has suggested that they have had a limited effect on price for the cryptocurrency, and mainly due to the low turnover volumes for futures contracts.
Mr. Lee’s theory does not seem to take this into account.
But it does suggest that futures contracts are beginning to play an important role in setting Bitcoin prices, and that the professional LaSalle street houses and traders are in charge.
Currently, Bitcoin is trading at 6,447.1548,-62.7402, or -0.96%, as of 1:05a BST, the market is open.
Mr. Lee is Bullish on Bitcoin’s prospects as well and has predicted a price target of $25,000 for the cryptocurrency by the end of this year, and since the start of this year, Bitcoin has lost 51.2% of its value
Have a terrific week.