Bitcoin Futures Expiration Led To 'Gut-Wrenching' Fall In Price, Fundstrat's Lee
- The "gut-wrenching" declines witnessed in Bitcoin's price in the week beginning June 10 was likely due to the expiration of futures linked to the top cryptocurrency,
- Fundstrat Global Co-founder Thomas Lee reportedly said in a client note. Lee, a prominent bull on Bitcoin, said the top cryptocurrency displayed "dramatic price changes" around CBOE futures expirations.
- He noted that crypto investor Justin Saslaw at Raptor Group had signaled the link earlier. Read more...
Crypto at a glance
Crypto at a glance According to a recent report from well-known crypto markets analyst Fundstrat’s 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 traders, who are long on bitcoin and short its futures contracts, sell their bitcoin holdings to generate “a handsome profit” for their futures bet. Lee calculated that bitcoin’s price has fallen by an average of 18 percent during the 10 days before contracts expire. It begins recovery from the sixth day onwards after contracts expire.
The current situation is further exacerbated by two factors. The first one is the “awful” sentiment and technicals for bitcoin and cryptocurrencies as regulatory agencies crack down on cryptocurrencies. The second one is the absence of sufficient liquidity to stem the effect of a large selloff. Lee notes that there has been “slow progress” by institutional investors to create channels for crypto investment.
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