The head of Fundstrat Global Advisors, Tom Lee, expressed his opinion about the recent drop in the price of Bitcoin. He believes that “significant volatility” is the result of the end of the futures contracts terms for the cryptocurrency.
The price decrease was observed every time in six cases when the validity period of Bitcoin futures came to an end, since the times at the Chicago Stock Exchange in December 2017:
“Bitcoin sees dramatic price changes around CBOE futures expirations… We compiled some of the data and this indeed seems to be true.”
Lee believes that the сryptocurrency falls by about 18% 10 days before the expiration of the futures, and the price recovery occurs 6 days after.
The head of Fundstrat explained that if a trader holds a “long position” in Bitcoin and “short” one in futures, he/she can sell large shares of BTC at an average price when the contract is drawing to completion in order to minimize the risks of error. However, after the expiration of the contract, he/she can sell the remaining BTC, which leads to a price reduction, and the contract closes “with a handsome profit.”
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