Rumours about the manipulation of the Bitcoin exchange rate by “large” players in the cryptocurrency market have been around for quite some time. Specific patterns seem to repeat on bitcoin charts, the world’s first cryptocurrency. If we connect the dots, a picture starts to develop, leading us to see who deliberately burst the bubble in 2017 and why bitcoin can repeat a similar declining scenario. We will try to understand this and more in this analysis.
Two years have passed since the CME Group Inc, the world’s leading and most diverse derivatives marketplace, launched bitcoin futures trading.
Adding bitcoin futures contracts became possible only after obtaining approval from the regulators and appropriate certifications from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for trading digital assets. To this day, CME is the leading US Bitcoin futures provider.
Talks about manipulating Bitcoin futures from the Chicago Exchange (CME) have long been confirmed by former CFTC head Christopher Giancarlo at a press conference.
Christopher said the Trump administration approved the launch of BTC futures on the CME Group in 2017 to help inflate another bubble, avoiding a repeat of the 2007 mortgage crisis.
Statement by Christopher Giancarlo:
Here is one of the untold stories of recent years. The CFTC, the Ministry of Finance, the Securities and Exchange Commission (SEC), and Gary Cohn, at that time, the director of the National Economic Council, believed that the launch of bitcoin futures would help to burst the bitcoin bubble. And it worked. We saw how the bubble grows, and we thought that the best way to eliminate it is to provide the market with tools to interact with it.
There is a striking systematic trend between the behavior of the Bitcoin price and the expiration dates of CME futures contracts. A similar pattern has already occurred several times, and now the story has repeated on the chart for the world to see.
The first launch of semi-annual futures contracts took place on December 15, 2017, trading began on December 17 at around $20,000.
In the first week of trading, the Bitcoin rate hit $12,000. And by the end of the June contracts — June 29, 2018, the exchange rate updated the next annual minimum reaching $5,700. Thus, in the first six months of trading futures contracts, the cryptocurrency lost 72% of its value.
Bitcoin growth over the past ten years is more than 18 million percent. As soon as tools were launched, which provided the opportunity to short Bitcoin, institutional players and funds began to play. They began to use this opportunity to speculate on the course of bitcoin. Over the next year, interest in derivatives continued to snowball. Since Bitcoin is an ideal example of a bubble that can be inflated/deflated an infinite number of times, it could not go unnoticed by the US regulators — CFTC and SEC. As a result, they approved the CBOE and CME exchanges for bitcoin futures trading.
If you look at the chart in detail from the moment of expiration of the first futures contracts, you can notice the formation of a technical analysis reversal pattern, Inverted Head and Shoulders — this range of $6,700 to $5,700, was signaling an imminent reversal of the downtrend.
The trend reversal happened, and the rebound during the month amounted to 47 percent of the local low. The Bitcoin exchange rate then proceeded to reach $8,500. Many analysts and central television channels, including CNBC, started talking about a trend reversal and that bitcoin correction down has ended. The King coin proceeded to do its usual job of shocking everyone, so Bitcoin re-started its decline, and all growth was absorbed in just a few weeks. Bitcoin soon revisited the range from which the “bull” growth began.
After forming a reversal pattern, many bitcoin supporters believed in further market growth and were able to contribute to a short-term uptrend. Around $8,500, another futures contract opens, leading to a six-month decline in bitcoin. By the end of the year, the exchange rate had sunk to a new low on the year, reaching $3,300.
Now a similar situation may be unfolding. Indeed, last year at the beginning of July and at peak market values, six-month futures contracts with expiration on December 27, 2019, started.
Six months later, bitcoin exchange rate fell 54 percent to a support level of $6,400. And again, futures contract dates correlate with the minima/maxima of the value of bitcoin.
A few days before the end of the contracts, the open interest in CMEs began to decline significantly, which suggests that the “major players” closed their positions before the upcoming expiration of futures.
A few days later, traders and analysts noticed on the chart again the reversal pattern of GiP, which formed in the range of $7,800- $6,400. The course from the minimum values increased by 50%; thus, this pattern worked well on the chart.
Throughout the growth on the CME exchange, another maximum was recorded for open positions and daily trading.
After the breakdown of the range of $8,400-$9,200, for several days, we observed price consolidation, as well as volume accumulation. Today, the price rushed up with new forces, confidently gaining a foothold at around $9,300.
Also, at the beginning of the upward momentum, bitcoin prices markedly dipped altcoins, indicating that large volumes continue to enter Bitcoin, and the situation is beginning to resemble the summer of 2018.
What can we expect next? The price can likely reach the level of $9,400-$9,600; from there, we may see massive sales, and the closure of long positions will follow. Trading volumes on the CME exchange will once again renew their maximum. And from the indicated level, we can expect a short correction, which will look similar to 2018 with a fall to the range of $8,000-$7,500.
Recall that trading futures with bots is available on 3Commas.io with the Binance Futures exchange.
This article does not claim to be the ultimate truth and is not financial advice or an investment recommendation. The material is purely educational with a technical and fundamental analysis of the cryptocurrency market. How you deal with this information from an investment point of view is personal. We simply provide new material for possible reflection and market analysis.