Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
Arcane Research has found a systematic pattern of shorting just before the CME Bitcoin Futures settlement every month, since January 2018. Thus, the speculations of manipulation are being weighed-in.
This week has turned to be a major disappointment for Bitcoin investors as Bitcoin price lost 20% by now. Earlier on Wednesday, September 25, Bitcoin lost $1500 in flash crash going below $8500 and striking panic in the market. Since then the bears have held a dominant position over the bulls.
Slipping downwards further, Bitcoin breach the support of $8000 and hit a low of $7935 on Thursday, September 26. At the time of writing, BTC price sits at $8000 levels. As per the observations made by Arcane Research, there’s a strong speculation of manipulation of the Bitcoin Futures contracts offered by CME.
The report states BTC price falling an average of 2.72% during the settlement period each month, since January 2018. And as the trend follows this time as well, the BTC price sunk below $8000 before today futures expiry. Explaining this situation, Arcane Crypto analyst Bendik Norheim Schei said:
“These futures contracts are optimal for manipulation. They are settled in dollars and not in bitcoin. The price for the settlement is determined by the bitcoin price in the underlying market. Thus, it is never actual bitcoin that change hands, and it is just an overlying market traded in dollars.”
He further added that it is very unlikely that it is just a mere coincidence that the BTC price tanks before the settlement of CME Bitcoin Futures contracts, every month. Schei added:
“The figures thus support a hypothesis that the bitcoin price is manipulated in advance of CME settlement. However, the figures do not say anything about deliberate manipulation or, for example, only a result of investors’ strategy of hedging…”
Bitcoin Trend Reversal
While CME futures might hint at a pattern of shorting Bitcoin before expiry, what about the Tuesday price crash? Schei says that it is “hard to tell” and his research team is further investigating into it. Speaking to CCN, Schei added:
“The fall we’re seeing right now (from 8400 to 8000) is more likely to be connected to this manipulation theory. The crash on [Tuesday] was outside of our estimation window, but this drop fit nicely within the window that we used in the analysis.”
Well, the newly released report shows that it won’t be right to completely blame Bakkt‘s soft launch for Tuesday’s price fall. However, there’s nothing where we can point with certainty.
When asked whether it was a “deliberate manipulation” by CME, Schei prefers to call this as “a natural effect of hedging strategies.” But Schei says that to get further into its details, it would be wise to directly talk to CME futures traders. He added:
“Hopefully we will get a better understanding by studying the micro-dynamics on different exchanges. We’re also trying to contact people that trade bitcoin futures on CME and see if we could get some information directly from them (who potentially could be the source of these movements).”
Popular Twitter handle Crypto Welson also stated that Bitcoin bounces back strongly after every expiry of CME futures. Thus, he states that we can see a trend reversal until the next expiry.