New report. Bitcoin Futures: Market Evolution

Cindicator’s latest research report, prepared by our analytical team and quant researchers, has generated a lot of buzz. The Bitcoin Futures: Market Evolution report received media coverage from leading crypto publications like CCN, Blokt, CryptoGlobe, and over 30 others across the globe (including in Spanish, French, and Russian). It was also shared over 250 times on social media, including by influencers such as @devnullius, @GigaBitcoin, and @XBTmoney. In today’s post we want to briefly summarise the report for you.

The methodology

Our researchers first looked at volumes on CBOE and CME futures and volumes on crypto exchanges in Bitcoin terms to gain an idea about the liquidity and development of the market. Traded futures volumes are considerably lower than total Bitcoins exchanged through the over-the-counter (OTC) market. Still, the analysts noted a positive variation that highlights an increase in institutional positions in the crypto market.

Graphical analysis

On the graph below, the red areas represent the seven-day period before the expiries of CBOE futures and the blue ones represent the seven-day period before CME expiries. Looking at the graphs it was clear why there was a common belief about the Bitcoin price tending to drop shortly before each futures expiry and recover after the contract fixing. This happened during the first expiries but became less visible after April 2018. Looking at each period in more detail, the Cindicator team found no consistent pattern.

Regression analysis

To confirm our visual findings that no clear pattern exists, the Cindicator team analysed whether a relationship exists between Bitcoin returns and futures expiry dates. The result of the regression analysis confirmed the previous findings. This means that we can’t confirm a role in influencing Bitcoin hourly returns in the seven-day and one-day periods before and after each expiry.

Correlation analysis

Cindicator’s analysts also calculated pairwise return correlations between contracts to confirm the absence of clear and recurring patterns of the Bitcoin price before and after contract rolling dates. As expected, correlations in the seven-day period before expiries are very low, confirming the absence of a linear relationship between returns.

Key findings

Our analysts reached the following conclusions:

• Bearish trends during price actions can influence BTC prices in a much stronger way with respect to positioning around futures expiries;
• The common idea that Bitcoin’s price is always dumped before expiries and pumped right after them has no solid basis (although there are cases when expiration dates should be considered);
• This analysis should be reconsidered when futures and OTC volumes start to converge, something not so unlikely given the possible entry of institutional investors into the crypto market influenced by, in part, lower Bitcoin volatility and the bearish market trend.

Simon Keusen, Head of Analytics at Cindicator, commented:

“Looking at past movements of Bitcoin’s price, we can see that there is no golden rule for trading based on futures expiration dates. Overall market trends can influence Bitcoin prices in a much stronger way. Our conclusions from this research are a good representation of the overall value we seek to provide to crypto investors by presenting different reasons for why certain market movements might happen and encouraging research and the use of analytical tools.”

Download the full Bitcoin Futures: Market Evolution report to find out more.

To receive our future reports, please subscribe to our weekly newsletter (just scroll down to the subscription form).