Why Friday’s $ 6 billion in Bitcoin and Ethereum may not move the market


After an incredible start in 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 made transaction fees soar.

Whenever the markets disappoint traders with a negative surprise, traders are quick to seek external explanations for their failure to interpret signals. But in reality, on April 30, six weeks before the initial price crash, there was a clear indication that China was concerned about the energy consumption of crypto mining.

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On May 6, the recently re-appointed chairman of the US Securities and Exchange Commission, Gary Gensler, addressed Congress to seek more regulatory oversight over the crypto space. But in defense of overly optimistic investors, similar promises have been circulating for over 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 the derivatives markets?

Cointelegraph was the first news agency to analyze the $ 2.5 billion bitcoin futures expiry, potentially giving the bears a $ 450 million head start if the price falls below $ 32,000 on June 25. Dollar holds -or-break moment as 73% of neutral to bullish options below USD 2,200 would be worthless.

Updated open interest numbers show open interest of $ 1.36 billion for ether options and other futures contracts valued at $ 500 million due to expire on Friday. Meanwhile, Bitcoin’s open interest has grown to $ 2.64 billion, while another $ 1.44 billion will expire in the futures markets.

To understand whether derivatives markets, primarily quarterly expiry times, have such a significant impact on prices, investors need to evaluate past expiration times.

December 2020 and March 2021 reflect divergent movements

Bitcoin launched a strong rally in November 2020 and returned 75% gains before expiring in December.

Bitcoin price will expire on Dec 2020 and March 2021. Source: TradingView

Over 102,000 Bitcoin options matured on Christmas Day, but there was no obvious impact. Instead, the upward trend continued as Bitcoin subsequently rose another 69% in 12 days.

March 2021, on the other hand, showed a completely different price action. Bitcoin price plunged 14% before the options expired, although it fully rebounded over the next four days.

It’s worth noting that Federal Reserve Chairman Jerome Powell said on March 22nd, “Bitcoin is too volatile to be money” and “nothing backed”.

In the same week, billionaire fund manager Ray Dalio expressed concerns about a possible “US Bitcoin ban”.

March, June and September 2020 showed no signs of landfill before expiration

If in March 2021 a possible reason for dumping activities could have been before the expiry, the previous year was exposed to the opposite development.

The Bitcoin price in March, June and September 2020 will expire. Source: TradingView

Bitcoin experienced a 31% bull run in the ten days prior to expiration on March 26, 2020. However, there was an 11% correction the following day, potentially leading investors to call it “manipulation”. However, the 45% drop in hash rate that surrounded the date partially explains the sell-off.

The June 26 expiration didn’t seem to have materially affected the price, as Bitcoin fell 2% before the event and another 2% over the next two days. However, an exactly opposite pattern occurred in the September 2020 expiration, when Bitcoin rose 2% before September 25 and continued to rise 2% in the following two days.

Options and futures do not expire as bearish or bullish

As the data from the last five quarterly expirations show, there is absolutely no evidence of any pump and dump (or inverse) movement prior to the derivative events.

For investors and traders waiting for confirmation from the bottom, the answer likely lies in the recomposition of Bitcoin’s hash rate.

One should also take into account that Chinese over-the-counter traders are restoring their fiat gateways following the recent nationwide ban on cryptocurrency transactions.

Bitcoin price has rebounded slightly from its sharp drop below $ 29,000, but in general, the past month has not been generous to BTC and Ether (ETH). Bitcoin failed to break the $ 40,000 resistance on multiple occasions, and the recent drop to a six-month low of $ 28,800 came as a surprising sign for many investors.

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