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Analysts have pointed out that Bitcoin’s price rises and falls in line with settlement dates for CME Bitcoin futures contracts. The phenomenon may point to market manipulation.
CME’s impact on Bitcoin
CME Group’s Bitcoin futures contracts were hailed as the bridge between institutional and retail investors.
Growing volumes support this narrative. The CME saw a 132 percent increase in average contracts traded per day relative to last year, a sign of interest from Wall Street. Recently, CME set a new trading volume record in May, with $1.3 billion in notional value traded in a single day.
But, there are analysts who believe that futures contracts are used to manipulate the crypto markets.
According to Luke Martin, host of the Coinist Podcast, there is a correlation between CME Bitcoin futures contract settlement dates and the Bitcoin price.
In July, Martin found that Bitcoin plunged 12.8 percent two weeks before CME contract expiration and down 6.9 percent one week before expiration. After the contracts settled on July 26, BTC rose 5.2 percent the week after and two weeks afterward the gains remained salient around 22 percent.
A similar situation occurred last month, added Martin. Bitcoin suffered a 7.9 percent decline two weeks before CME’s futures expired and remained down 6 percent one week afterward. Once the futures contracts settled on Aug. 30, BTC surged 11.4 percent one week after the event and kept 9.9 gains after two weeks.
Even though CME Bitcoin contract settlement doesn’t perfectly predict Bitcoin price movement, the high volatility around settlement dates show signs of market manipulation. As a matter of fact, a new report by Arcane Research found that Bitcoin dropped 75 percent of the time before CME futures contracts settled.
The research shows that since January 2018, Bitcoin tends to fall on average 2.27 percent as monthly settlement approaches. When adjusting for “large outliers” the drop rate is 1.99 percent.
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