In a recent interview with Bloomberg, Tom Lee, Co-founder and head of research at Fundstrat Global Advisors, says the recent price drop of Bitcoin is the result of futures contracts expiring. Lee goes on to explain there have been six expirations of futures contracts since the CBOE first launched Bitcoin futures in December 2017.
If a trader is long on Bitcoin as well as short on the futures, holders may be prompted to sell a larger share of their Bitcoin at volume weighted average price as the contracts move closer to expiration date. As the expiration date approaches, they might sell the remaining amount of Bitcoin, which would cause the price to drop, leaving the short position of the futures contracts they close, with a nice profit.
Lee also states that the overall inflow into the crypto markets have been insufficient. There are more net supply in mining rewards, ICO, and capital gains taxes. Another reason for the slow climb in Bitcoin’s price may be due to the slow progress of introducing tools for institutional investments, all though Coinbase did come out with a new suite of products designed to cater to institutions.
It’s also worth noting that Lee’s observation isn’t the first to relate the decline of Bitcoin’s price on expiring futures contracts. Back in May, the San Francisco Federal Reserve issued a report, which also tied the overall decline in the price of first and foremost cryptocurrency to December’s BTC futures launch.