Did Bitcoin Futures Crash the Price?

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Panic was in the air yesterday when Europe, and then America, suddenly woke up to a sea of red with the three big ones down as much as 50%.

Bitcoin was leading the sell-off, with the rest following in lockstep, but absent any big news, finding a reason is difficult.

One candidate might be Roger Ver who, unfairly in our view, speculated in an interview on CNBC that there could be a situation where all bitcoin miners leave, making its network in-operational.

Considering that it was a mainstream audience which may have only heard that bitcoin could stop functioning and they would be unable to access their coins, they may have panicked.

However, what Roger Ver did not mention was that the mining algorithm could easily be changed in such situation. This is, after all, just code. Any problem, as such, can easily be fixed with the network proving it works and will continue to work probably virtually forever or as long as its needed.

Another reason for the sell-off might be Bitfinex and Tether closing new accounts registration, but neither of these two appear to be of such a scale as to cause a crash.

The more likely candidate therefore might simply be that there was some profit taking ahead of Christmas following stupendous gains, but why yesterday specifically? Could it be the bitcoin futures?

It was the last day of their first week of trading yesterday, closing a week long downwards movement that begun last Sunday when CME bitcoin futures opened.

Although futures were trading at a premium on December the 16th, bitcoin’s price nonetheless moved downwards and has kept going down until futures closed last night at 10PM London time to open on Sunday at 11PM GMT.

Now, those futures are trading at a discount, although part of it may be that they are closed, with the last price remaining frozen to what was on Friday, which may mean some of their shorts might get called.

CME bitcoin futures at closing on Friday

Volumes apparently picked up on the day as well, although that might have been expected considering the significant volatility yesterday.

CBOE’s bitcoin futures volumes more than tripled yesterday, while CME’s volumes picked up too on its first last day of trading for the week.

So, were bankers crashing bitcoin? Who knows, but there are quite a few coincidences in this first week of futures trading.

However, why they should affect spot price when they are fiat settled and never touch actual bitcoin remains unclear, with one of the potential reason being that they take away demand from real bitcoin to fake futures as they are cash settled requiring not delivery of the asset.

But, a potential correlation does not mean causation. It could have simply coincided with sentiment swings, so we might have to wait and see how they perform in the next few weeks to gain a clearer picture.

 

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3 Comments on "Did Bitcoin Futures Crash the Price?"

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Letting Roger Ver appear on national television is not a good idea. He tends to speak without thinking and is all about self promotion. He will dupe a lot of people before the penny drops.

Can somebody explain to me how can Futures touch BTC price, where is connection? For me, maybe I’m wrong, is like I’m on drag race, and betting which car will win, and then somebody says, you as bettor are wrong for saying that car 1 will win? 2nd BCH, no words, just don’t like idea Roger, name, … pure copy cat, and what happened with pre rise of price before Coinbase, inside job! 3rd No it didn’t drop because of futures, it dropped because it is bubble, and BCH spammed BTc hell out, but I hope now they see, that… Read more »
The fees might be a real problem… how can it be a currency with $20 + fees and they are growing, at this rate it will be $100 or $200 just to send a bit of money. I run a t-shirt shop that took Bitcoin, now I can not, the fees cost as much as the shirts. Bitcoin is killing itself, they have lost the plot, it is unworkable, and unusable, fix it soon or the whole thing is going to go bust. Regretfully after years of being in Bitcoin, I am moving 50% into coins that are more scalable.… Read more »