Does the bitcoin (BTC) price crash when CME futures expire?

Wed 19 May 2021 ▪ 11h55 ▪ 3 min read — by William Proctor

Simple theories that seem to explain how markets move attract a lot of attention. But, beware of myths built on shaky scientific foundations!

The birth of a myth

The monthly expiration of futures and the strike date of options have historically been accused of playing to the bears’ favour.

According to 2019 studies, bitcoin markets are subject to an average decline of 2.3% in the 40 hours prior to the expiration date of Chicago Mercantile Exchange (CME) futures.

However, the bearish effect of CME futures expirations went unverified in 2020. Fast-forward to 2021, and the theory appears to be gaining traction.

The BTC price retraced before the expiry of futures and options in the first three months of 2021.

Some investors and traders believe that this ‘futures and options expiration date dip’ is set to become a firm trend going ahead.

Yet, a broader analysis proves that this theory is actually a myth and has no scientific basis.

Hypothetically unlikely

Bitcoin has risen 788% in the last 13 months. If we ignore the month of May, August 2020 was the worst performing month, with a monthly loss of 7.5%.

Choosing a random starting point within a month will likely show an upward trend if you read the bitcoin price chart from left to right.

What conclusions can be drawn from this? Positive trends are the norm rather than the exception during bull runs.

The explanations for the decline in bitcoin’s performance at the end of the month may be easy to dismantle, making them far from certain.

One theory is that market makers and arbitrage trading rooms benefit from the correction in the BTC price after a quick increase.

Another is more technical, and is linked to how long-term leveraged futures and call option holders hedge their trades.

Yet, the bitcoin price has not declined in three of the last seven expiration periods. Notably, the October and December 2020 expirations were not preceded by a fall in the price of Bitcoin.

What’s more, April 2021 saw a 12% boost in the five days leading up to the deadline on the 30th.

All of these facts call into question the relevance of the expirations of CME futures.

The expirations of futures and strike date of options has nothing to do with the current bitcoin crash: bitcoin is trading at around $43,200 at the time of writing. Is any further proof necessary for the power of a certain billionaire over the bitcoin markets?

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William Proctor avatar
William Proctor

Hi! Привет! Salut ! Je m’intéresse à deux choses : la crypto et les langues. Je suis donc heureux de faire partie de l’équipe multinationale du CoinTribune, où je peux partager mes connaissances de la crypto avec des gens des quatre coins du monde – l’un article après l’autre.


The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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