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Many traders believe the narrative that Bitcoin prices fall ahead of CME BTC futures expirations, but evidence reveals that this is a bark and no bite pattern.
Historically, the operation around the Bitcoin (BTC) monthly futures and options expiry has been blamed for dampening bullish sentiment. Several reports from 2019 find a 2.3 percent average decrease in the price of Bitcoin 40 hours before the CME futures settlement deadline.
However, as of June 2020, the trend had disappeared. Although 2020 claims to have dismissed the possible negative effect of CME expirations, the current year seems to affirm the hypothesis so far. Bitcoin’s price has been depressed ahead of the expiration of futures and options contracts in the first three months of 2021.
Some investors and traders have pointed out that Bitcoin’s incredible rally after the recent futures and options expiry dates has become a trend.
$BTC options expiry in about 8 hours…
Last Friday of every month has been a pretty good entry point for past 8 months …
Past 3 months price has been hammered in the hours / days leading up to expiry
Observation not advice. Let’s see if the pattern holds. pic.twitter.com/3CJqI6m6jl
— 阿龍 (@KnutsonJesse) April 23, 2021
BTC has effectively rallied in the days following the expiry, but expanding this analysis uncovers a less-than-satisfactory trend.
Three consecutive events don’t prove a trend
Bitcoin’s performance during the last 13 months has been nothing short of incredible, with the cryptocurrency increasing by 788 percent. August 2020 proved to be the worst month, with BTC exhibiting a 7.5 percent negative result. As a result, selecting random starting points within the month is expected to display a similar positive pattern.
For eg, if the “last quarter” moon phase is used as a surrogate, the chances of a rally occuring after each occurrence are very high.
Indeed, as depicted above, Bitcoin has rallied after five of the last six instances. The only inference that may be drawn is that during bull markets, bullish patterns are the rule rather than the anomaly.
While there might be any explanation for Bitcoin’s end-of-month underperformance, these are just theories.
While market makers and arbitrage desks can benefit from price suppression after a rally, other factors, such as leverage futures longs and call option investors, will balance that out.
Bitcoin price did not drop in three of the last seven expiries
Therefore, it makes sense to analyze the potential price suppression ahead of the expiry instead of looking for explanations for a rally during a bull market.
Both the October and December 2020 expirations failed to generate any negative momentum ahead of their respective dates. Meanwhile, the 12 percent positive results in the five days preceding the most recent April 30 expiry raises concerns about the CME event’s significance.
Given that there hasn’t been a price drop ahead of monthly futures and options expirations in three of the last seven cases, this reality may be enough to place a nail in the coffin of the baseless myth.
As previously said, attempting to build hypotheses as to why sellers behaved more vigorously on particular dates is unlikely to produce results.
As shown above, Bitcoin’s price did not underperform in three of the last seven expiries. When good results after a given date has been seen to be normal during a bull run, a 57 percent success rate should not be used to describe a pattern.