Bitcoin price recovered slightly after falling below $29,000, but overall, the past month has not been generous for BTC and Ether (ETH). Bitcoin has repeatedly failed to overcome the $40,000 resistance, and the recent drop to a six-month low of $28,800 has been an amazing sign for many investors.
After an impressive launch in 2021 on May 12, Ether reached a peak of $4,380, but has since fallen by 55%. Unlike the leading cryptocurrency, the Ethereum network faces competition from non-Proof of Work projects, and thus does not face the throttling issues that have led to higher transaction fees.
When the markets disappoint traders with a negative surprise, traders quickly look for external explanations for their inability to interpret the signals. But in fact, there was a clear indication that China was concerned about the energy consumption of crypto-mining on April 30, six weeks before the first price drop.
On May 6, Gary Gensler, the recently confirmed chair of the US Securities and Exchange Commission, attended a conference on expanding regulatory oversight into the cryptocurrency space. However, in defense of over-optimistic investors, such promises have been circulating for more than four years.
Despite the many reasons for the recent negative developments in the market, traders like to blame others for their mistakes, and what better scapegoat than the derivatives markets?
Cointelegraph was the first news outlet to analyze the $2.5 billion Bitcoin futures contract, which could potentially give the bears an advantage of $450 million if the price does not hold $32,000 on June 25 – or the breakout point, 73% of options with a neutral upside will be useless. under $2200.
The updated open interest figures show an open interest rate of $1.36 billion for ether options and another $500 million in futures contracts that expire on Friday. Meanwhile, open interest in Bitcoin options rose to $2.64 billion, with another $1.44 billion expiring in futures markets.
To understand whether the derivatives markets, especially quarterly maturities, have such a significant impact on prices, investors should look at past maturities.
December 2020 and March 2021 reflect divergent movements
Bitcoin started a strong rally in November 2020, collecting 75% of its profits before the December expiration date.
Bitcoin price expires in December 2020 and March 2021. Source: TradingView
Over 102,000 bitcoin options matured on Christmas Day, but there was no apparent effect. Instead, the uptrend continued as Bitcoin gained another 69% in 12 days.
On the other hand, March 2021 showed a completely different price action. Bitcoin price fell 14% before options expired, although it made a full recovery over the next four days.
Notably, on March 22, US Federal Reserve Chairman Jerome Powell said “Bitcoin is too volatile to be cash” and “is not backed by anything.”
In the same week, billionaire fund manager Ray Dalio raised concerns about a possible “Bitcoin ban.”
March, June and September 2020 showed no signs of unloading waste before expiration.
If in March 2021 it was possible to present possible arguments for dumping activity before the deadline, the opposite trend was observed in the previous year.
Bitcoin price expires in March, June and September 2020. Source: TradingView
Bitcoin has increased by 31% in the 10 days that will end on March 26, 2020. However, the next day, there was an 11% correction, which gave investors an excuse to “manipulate”. However, the 45% computer-related decline is partially explained.
The June 26 expiration didn’t seem to have much of an impact on the price, with Bitcoin dropping 2% before the event and another 2% over the next two days. However, the opposite picture occurred after September 2020, when Bitcoin raised 2% before September 25th and continued to collect 2% over the next two days.
The expiry of options and futures contracts cannot be considered bearish or bullish
As the data for the previous five-quarter expiration shows, there is absolutely no indication of pump and dump movement (or reverse movement) before derivatives events.
For investors and traders waiting for the bottom confirmation, the answer is likely to rewrite the Bitcoin hash rate.
It should also be considered that Chinese OTC traders are rebuilding their cash gates after the recent nationwide ban on cryptocurrency trading.