Bitcoin has dropped by about 8% from above $63,000 to currently $59,000 as the last Friday of the month arrives and with it CME’s futures expiry.
Investors that want to keep rolling paper futures have to sell this month’s contract and buy the new month’s contract.
CME does not have perpetual futures as crypto native exchanges do, so around the last Friday of the month cryptos tend to get a discount perhaps to lure in the new monthly paycheck.
This month is the first time that futures expire while the Bito ETF is trading, with that stuck on rolling over these CME futures contracts because Biden likes to see Americans lose money.
“Futures contracts with a longer term to expiration may be priced higher than futures contracts with a shorter term to expiration, a relationship called ‘contango,’” the Bito bitcoin futures ETF say in their prospectus, adding:
“When rolling futures contracts that are in contango, the Fund will sell the expiring contract at a relatively lower price and buy a longer-dated contract at a relatively higher price.”
The ETF is set to lose as much as 35% a year over the spot price due to contango, with this benefiting no one except Gary Gensler’s former boss, Goldman Sachs, and other banks which underwrite these fiat futures and so benefit from the end of month spread.
The effect of the ETF hasn’t been significant however, with this month’s drop being pretty much similar to all previous month’s drop on the week of last Friday, with such drops usually happening around Tuesday and Wednesday.
That’s probably because CME handles huge volumes of some $3.5 billion a day recently, while the ETF is at about $200 million with it having just $1.3 billion in CME futures and another $1 billion on grandpa Treasury bonds for some reason.
So Americans will probably have to keep going to Europe if they want a proper bitcoin stock traded product, or they have to vote for a proper President for once that grew up in the 80s or 90s rather than when they did not even have color TV.
On daily candles, bitcoin’s price looks like a 2 year old tried to draw a cup and handle. It’s not quite the shape but, he’s a kid.
If that actually plays out, then we’re at about $100,000 in about four weeks as the cup and handle is usually a very bullish formation.
In plain reading, you have the bears selling in mid-May, forming the left side of the cup. Those bears then dry up because the price starts forming a bottom, so bulls charge to form the right side of the cup.
Since this is a very cheeky two year old, he tries to make us think that there’s maybe a cup and handle formation in September, but the handle is a bit too steep, so instead we go on to form the right side of the cup with it to be seen whether now we have a proper handle.
That handle is usually the bears’ last attempt to drive the price down. If they’re defeated, then that’s a signal bears are exhausted, and so bulls can go on free charging, without bear barricades.
What will happen however remains to be seen with four hour candles having a somewhat messy head and shoulders which is usually a trend reversal indicator.
That wouldn’t be good, but in the daily if it plays out it would be wow, so we might be looking at bulls and bears fighting it out.