In December 2018 a Crypto.IQ article detailed the impact of Chicago Mercantile Exchange (CME) Bitcoin Futures expirations on the market by analyzing each expiration. At the time it was found that expirations had a significant impact on the market, with downtrends/uptrends in the market often beginning after one expiration and ending at the next expiration. Oftentimes a crash/rally was noted right before expiration, which is known as banging the close, a technique used by margin traders to enhance their profits right before a contract expires.
Based on the data, as can be seen in the below chart, it appears that CME Bitcoin futures expirations have continued to have a pronounced impact on the market in 2019.
Chart of Bitcoin’s (BTC) price over time with volume at the bottom. Green vertical lines are CME Futures expirations. Courtesy of tradingview.com
Starting at the December 2018 expiration, where the previous Crypto.IQ article on this topic left off, the price of Bitcoin (BTC) dropped from $3,850 to $3,550 in the day before the expiration, with an even bigger drop from $4,200 to $3,550 in the 4 days before the expiration.
In the two days after the February expiration, there was high volatility, with the price of Bitcoin (BTC) rising from $3,900 to $4,150 before crashing to $3,700.
A few days after the March expiration, the price of Bitcoin (BTC) rallied from $4,100 to $5,100. This was the beginning of the ‘mini bull run’ that happened this spring and early summer. It is notable how the rally did not begin until after the March expiration, suggesting that either CME traders suppressed the price of Bitcoin (BTC) in February to protect their positions, or that CME traders coordinated to start the rally once the March expiration was done, or perhaps a mixture of both.
In the two days before the April expiration, the price of Bitcoin (BTC) dropped from $5,600 to $5,000 and then began to rally again about four days later.
In the day before the May expiration, the price of Bitcoin (BTC) dropped from $9,100 to $8,000 and then recovered to $8,900 within a couple of days after the expiration.
A couple of days before the June expiration the price of Bitcoin (BTC) reached $13,900, which was the height of the mini bull run, before crashing to $10,300. Bitcoin (BTC) then recovered to $12,400 within a day after the expiration. However, the crash right before expiration seemingly broke the mini bull run of 2019, since after that point Bitcoin (BTC) stopped making new highs.
Therefore, it can be speculated that CME Bitcoin Futures expirations played a role in ending the 2019 mini bull run.
Bitcoin (BTC) recovered to $13,200 in the middle of July but then declined until reaching a price of $9,900 during the July expiration. Within a day after the July expiration Bitcoin (BTC) declined further to $9,300.
Bitcoin (BTC) then staged a recovery rally in the first week of August, reaching as high as $12,300, but then declined to $9,500 by the time the August expiration happened. Right after the August expiration Bitcoin (BTC) staged another recovery rally to $11,000.
The impact of CME Bitcoin futures expiration was quite obvious in September, with the price of Bitcoin (BTC) declining from $10,300 to $7,800 in the week before the expiration, with most of this decline happening in the few days before the expiration.
In October the impact of the expiration was once again highly noticeable, with the price of Bitcoin (BTC) declining from $8,300 to $7,300 in the few days before the expiration.
Aside from these specific details for each month’s expiration, zooming out it can be seen that the CME Bitcoin futures expiration is often an inflection point for the market and characterized by high volatility. Trading volume also often spikes right around the expiration as well. Further, just like in 2018, the beginning and ending of uptrends/downtrends on the Bitcoin (BTC) market usually coincides with expirations.
Thus, traders need to be aware of the CME Bitcoin Futures expiration, which happens on the last Friday of every month, since the data shows the expiration is often associated with significant market movements and the beginning or end of longer-term uptrends/downtrends on the Bitcoin (BTC) market. In most of 2019 there has been a strong downtrend in price right before the expiration, followed by a strong uptrend in the days after the expiration, although not every month fit this trend, just most.