Something very strange is going on with bitcoin futures to the point on the expiry day, Friday 31st of May, we just copy pasted previous month’s article published on Friday April 26th.
That’s because the exact same thing happened in both occasions whereby bitcoin’s price suddenly fell by about 10% in an identical fashion.
Sometime after 4PM on Thursday the day before futures expire, there’s a large market order sell-off that appears unnatural.
That’s because CME uses a one hour period, between 3PM to 4PM each day, to calculate the CME CF Bitcoin Reference Rate (BRR) which is what futures are based on.
“This window needed to be wide enough to allow for a sufficient number of trades to be included but narrow enough such that the calculated rate is still relevant and representative of the market,” CME says.
During this one hour period they utilize a method that ensures price can’t be manipulated, but why just one hour rather than continuously?
That question is not answered in this analysis with this one hour window being very similar to “fixing” as they call it.
The price of gold, foreign exchange, interest rates and much else is not determined on exchanges, but at a once a day “meeting” called a Silver Fix or Gold Fix or whatever else they’re fixing.
It is through that once a day meeting, which nowadays is a sort of online auction, that the price of gold and much else was rigged.
Here at CME there is no “meeting,” but this one hour window is basically a price fixing. To manipulate it, thus, you perform your price action before this price fixing or after it if you want to “fix” it for the next day.
CME says 3PM to 4PM London time was chosen because that’s when there is most volume. They then go onto quite some detail to show a number of measures that ensure price can’t be manipulated during this one hour period.
Which is fine, but what about before or after it? They’re completely silent on that point even though this analysis has probably been prompted by a copy pasted article being as correct in May as in April.
The regulators, of course, are either asleep at the wheel or complicit, because they say they want to prevent price manipulation while at the same time encouraging the setting up of these old fashioned “fixing” methods that have been found by courts or by admission to facilitate price rigging.
The Securities and Exchanges Commission (SEC) in addition has also effectively demanded an actual bitcoin fix, which they call a bitcoin auction.
That was set-up by Gemini ahead of their failed bid for an ETF, but no one pays much attention to that auction as there’s just not that tradition in this space or necessity for it as there may be for gold in the 1800s.
CME, however, is from the 1800s, with it founded in 1841, and they have all the Wall Street boys as well. So by the looks of it, they’ve implemented their own “fix” that appears to facilitate rather than prevent manipulation.