Traders are looking for BTC and ETH to make a decisive move before $ 6 billion in quarterly futures and option expirations on Friday, but what does the retroactive data show?
After an incredible start to 2021, Ether peaked at $ 4,380 on May 12, but has fallen 55% since then. Unlike the leading cryptocurrency, the Ethereum network faces competition from projects that don’t rely on proof of work, so it doesn’t face the bottleneck issues that caused transaction fees to skyrocket.
Whenever markets disappoint traders with a negative surprise, traders are quick to seek outside explanations for their inability to interpret the signals. But in reality, a clear indication that China was concerned about crypto mining power consumption came to light on April 30, six weeks before the initial price drop.
On May 6, the recently confirmed US Securities and Exchange Commission Chairman Gary Gensler addressed Congress to provide more regulatory oversight to the crypto space. However, in defense of overly optimistic investors, similar promises have been circulating for more than four years.
Regardless of the many reasons behind the recent negative market performance, traders like to blame someone for their mistakes, and what better scapegoat than derivatives markets?
Cointelegraph was the first news outlet to analyze the expiration of $ 2.5 billion worth of Bitcoin futures, which could give the bears a $ 450 million lead if the price falls short of $ 32,000 on June 25. . On June 12, Cointelegraph said that the expiration of the $ 1.5 billion monthly Ether options would be a success. Breakout moment, as 73% of bullish-neutral options would be worthless below $ 2,200.
Updated open interest figures show $ 1.36 billion open interest for Ether options and another $ 500 million in futures contracts expiring on Friday. Meanwhile, open interest in Bitcoin options has grown to $ 2.64 billion, while another $ 1.44 billion will expire in the futures markets.
To understand whether derivatives markets, primarily quarterly maturities, have such a significant impact on prices, investors need to assess past maturities.
December 2020 and March 2021 reflect divergent movements
In November 2020, Bitcoin started a strong rally, racking up 75% gains before the December expiration.
The price of Bitcoin expires in December 2020 and March 2021. Source: TradingView
Over 102,000 Bitcoin options matured on Christmas Day, but there was no apparent impact. Instead, the uptrend continued as Bitcoin subsequently rallied another 69% in 12 days.
March 2021, on the other hand, showed completely different price action. The price of Bitcoin plunged 14% before the options expired, although it made a full recovery over the next four days.
It’s worth noting that on March 22, US Federal Reserve Chairman Jerome Powell said, “Bitcoin is too volatile to be money” and “is not backed by anything.”
In that same week, billionaire fund manager Ray Dalio raised concerns about a possible “US Bitcoin ban.”
March, June and September 2020 showed no signs of a roll-over before expiration.
If March 2021 could have created a possible case for dumping activity before expiration, the previous year faced an opposite move.
The price of Bitcoin in March, June and September 2020 expires. Source: TradingView
Bitcoin had a 31% bull run in the ten days leading up to the March 26, 2020 expiration. However, an 11% correction took place the next day, which could create a case for investors to cite the ‘handling’. However, the 45% drop in hash rate that surrounded the date partially explains the sell-off.
The June 26 expiration did not appear to significantly affect the price because Bitcoin fell 2% before the event and another 2% over the next two days. However, an exact reverse pattern occurred in the September 2020 expiration when Bitcoin rose 2% prior to September 25 and continued to rise by 2% for the next two days.
Options and futures expirations cannot be considered bearish or bullish.
As the data for the previous five quarterly maturities shows, there is absolutely no indication of a pump-and-dump (or reverse) move before derivative events.
For investors and traders waiting for a substantive confirmation, the answer is likely to lie in the recomposition of the Bitcoin hash rate.
Also to be noted are Chinese OTC merchants who re-established their fiat gateways after the recent national ban on cryptocurrency transactions.
The price of Bitcoin has recovered slightly from its steep drop below $ 29,000, but overall, the past month has not been generous with BTC and Ether (ETH). Bitcoin has failed to break the $ 40,000 resistance multiple times, and the recent drop to a six-month low at $ 28,800 was a surprising sign for many investors.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.