Data shows that the claim “Bitcoin price will drop before CME expires” is a myth


In the past, activity related to the monthly expiration of Bitcoin Futures and Options (BTC) has been blamed for the weakening of the upward momentum. Some 2019 studies found an average decrease in BTC price of 2.3% 40 hours before the settlement date for CME futures.

However, as Cointelegraph reported in June 2020, the effect wore off. While 2020 seems to have rejected the possible negative effects of CME expiration times so far, the current year seems to confirm the theory. Bitcoin’s price was suppressed before futures and options expired in the first three months of 2021.

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Bitcoin performance before and after CME expiration, USD. Source: TradingView

Some investors and traders have indicated that Bitcoin’s incredible rally has become a trend following the recent expiration dates for futures and options.

BTC has effectively recovered in the days after it expired, but extending this analysis shows a less-than-satisfactory trend.

Three consecutive events are not a trend

The last 13 months have been nothing short of spectacular for Bitcoin as the cryptocurrency gained 788%. August 2020 turned out to be the worst month as BTC showed a negative performance of 7.5%. Choosing random starting points within a month is therefore likely to show a similar positive trend.

For example, if you use the last quarter’s moon phase as a proxy, the likelihood that a rally will take place after each event is very high.

Bitcoin performance after last quarter’s moon, USD. Source: TradingView

As shown above, Bitcoin actually recovered after five of the last six instances. The only conclusion that could be drawn is that positive trends are the norm rather than the exception in bull runs.

While there may be an explanation for why Bitcoin was underperforming at the end of the month, these are just hypotheses.

While market makers and arbitrage desks could benefit from price suppression after a rally, other forces, including leverage futures longs and call option holders, would offset this.

Bitcoin price has not decreased in three of the last seven expiration times

Therefore, it makes sense to analyze the potential price suppression before it expires, rather than looking for explanations for a rally during a bull market.

Bitcoin performance before and after CME expiration in 2020, USD. Source: TradingView

Both October and December 2020 expiration times showed no negative pressure prior to these dates. The positive performance of 12% on the five days before the last expiry on April 30th also raises a big question mark about the importance of the CME event.

Given that three of the last seven cases have not seen price drops before the monthly futures and options expire, this evidence should hit the coffin of the baseless myth.

As mentioned earlier, trying to develop theories about why salespeople acted more aggressively on certain dates is unlikely to produce results.

As shown above, Bitcoin’s price has lagged behind expectations for three of the last seven expiration periods. A 57% success rate should not define a trend if positive performance has been shown to be common after a certain date during a bull run.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.