CME Bitcoin expiration is imminent: Why does the crypto market tend to recover on its close? 🚨 This article is 5 years old...
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CME Bitcoin expiration is imminent: Why does the crypto market tend to recover on its close?
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Updated: Feb. 29, 2020 at 3:05 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
The CME Bitcoin futures market will close at 4 pm UTC on Feb. 28. Every time the cryptocurrency market saw futures close in the last four months, it tended to rebound.
Will Bitcoin recover upon futures close?
Throughout the past three months, the CME Bitcoin futures market closed on Jan. 31, Dec. 27, and Nov. 29. On all three days, the Bitcoin price rebounded before and after the close of CME’s monthly contract.
As specified on the contract details, the trading for each monthly contract “terminates at 4:00 p.m. London time on the last Friday of the contract month.”
Coincidentally, every time the monthly BTC futures contract of CME closed in the last several months, the cryptocurrency market recovered.
The possible cause of the recovery could be the pressure relieved by the CME market on the bitcoin price.
On days with high trading activity, the CME BTC futures market settles about $500 million in daily volume, accounting for a large portion of the volume of the cryptocurrency market.
Why does BTC price tend to increase upon CME close?
Whether the CME close leads the bitcoin price to go up or merely causes heightened volatility in the cryptocurrency market remains unclear.
Before the close, traders typically try to reach gaps in the bitcoin price and the CME price. As the Bitcoin price dropped to the mid-$8,000 region, it closed a CME gap that has been present for well over a month at around $8,550.
As said by technical analyst Jacob Canfield, CME gaps tend to be filled 99 percent of the time, and while some gaps get filled faster than others, most gaps eventually get filled the majority of the time.
When major gaps are closed, it provides more stability in the market and a more clear direction for the price trend of bitcoin.
But, Mati Greenspan, the founder of Quantum Economics, said that he is not convinced gaps are filled intentionally by traders. He noted that the volatile price action of bitcoin could simply be filling the gaps on CME’s bitcoin chart as time passes.
Greenspan said:
“Not sure that CME gaps are a real threat to bitcoin’s price discovery process. Prices go up and down and tend to repeat themselves over time. That’s why most gaps end up getting covered because markets aren’t unidirectional.”
Already, ahead of the CME close, the Bitcoin price has started to show signs of a short-term recovery. The price of BTC dropped to as low as $8,450, before rebounding to $8,650.
Bitcoin Market Data
At the time of press 3:05 pm UTC on Feb. 29, 2020, Bitcoin is ranked #1 by market cap and the price is down 0.38% over the past 24 hours. Bitcoin has a market capitalization of $157.48 billion with a 24-hour trading volume of $39.15 billion. Learn more about Bitcoin ›
Crypto Market Summary
At the time of press 3:05 pm UTC on Feb. 29, 2020, the total crypto market is valued at at $246.2 billion with a 24-hour volume of $140.89 billion. Bitcoin dominance is currently at 63.94%. Learn more about the crypto market ›
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
CME Group
CME Group is a global markets company empowering participants to efficiently manage risk and capture opportunities in every major asset class..
Jacob Canfield is recognized for his expertise in trading and his entrepreneurial acumen, with a rich background as an Army veteran and a record of successful business ventures across various sectors.
Mati Greenspan is the entrepreneurial mind behind Quantum Economics, a firm that specializes in FinTech research, advisory, and money management.
