A myth? Let’s see why the expiration of CME’s Bitcoin futures is irrelevant


The Chicago Mercantile Exchange’s (CME) Bitcoin futures and options contracts expire on the last Friday of every month, making traders fear that the recent drop in the BTC price could trigger a weakening of the markets.

According to a September 2019 report by Arcane Research and Cointelegraph, the BTC price generally falls 2.3% before each monthly expiration of CME contracts. Given the size of the upcoming settlement, it is worth taking a moment to analyze new data and assess whether the ghosts of the ‚fall of CME‘ continue to haunt the markets.

The study mentioned above considers „deliberate manipulation“ to be the culprit, but apart from that, it found that 15 of the 20 months had negative returns in the last 40 hours before the WBS maturity.

Institutional fomo? The open interest of CME’s Bitcoin futures shot up to $841 million

Recent data refutes the theory
Applying the same methodology as the 2019 study, we try to determine if the theory is still true.

The study was conducted by comparing the average price 40 hours before each event with the previous 40 hours of trading. This time period is completely arbitrary, although it is maintained to provide a basis for comparison.

The negative trend observed in the September 2019 analysis continued during the following months. As indicated in the chart above, November 2019 saw a significant rebound of Bitcoin (BTC) with gains of 4.4% before maturity.

No other month since the study began in January 2018 has shown such a positive figure. The previous rally occurred in September 2018, with a 2.4% gain in the 40 hours prior to the futures contracts.

BTC’s halving could have changed the narrative

The third Bitcoin halving occurred in May 2020; therefore, November 2019 was six months before the event. The average profitability of 40 hours in the last ten months is + 0.3%, and that includes the negative behavior of 5% in September.

One way to measure the impact of this event on investors‘ expectations is to analyze the change in Bitcoin’s futures portfolios at CME.

This data alone doesn’t prove whether investors were optimistic or pessimistic at the time, but the growth in open interest indicates the entry of new investors or more significant positions.

In any case, this could indicate that halving has had an impact on these price movements.

CME Bitcoin Futures Open Interest, USD terms

Open interest of Bitcoin futures from CME, expressed in USD. Source: Skew

Open interest in CME’s Bitcoin Method futures grew 186% to $390 million from November 2019 to May’s halving.

This indicates that the interest of institutional investors began to increase at the same time that the 40-hour variation indicator began to reverse its negative trend.

The latest data shows about $658 million in CME’s Bitcoin futures, as shown in the chart above.

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