The bitcoin price fluctuations that you think are actually giving the futures a "replenishment difference"

As long as there is interest, someone will manipulate the price.

Bitcoin was originally created as a trading tool to get rid of legal tenders, but now it has become a speculative asset.

Companies such as the Chicago Mercantile Exchange (CME), the Chicago Board Options Exchange (CBOE), and Grayscale have developed products based on changes in bitcoin prices to serve investors who do not want to risk.

Among these products, CME Group's bitcoin futures products are more popular. In the past six months, the number of open positions has reached a record high, and the number of new account registrations has also surged. According to the latest data, more than 2,960 accounts have so far traded Bitcoin futures contracts at CME Group. In the first half of 2019 alone, more than 950 accounts were added, and total customer registrations increased by more than 30%.

As shown above, the open interest on the Chicago Mercantile Exchange's Bitcoin futures has been steadily rising, reaching a record 6,069 contracts as of the end of June 2019, indicating strong market demand. (Star Jun o-daily Note: Open interest refers to the total number of derivative contracts that have not yet been settled, so it is open).

Bitcoin futures are inherently attractive and a tool to help traders understand the correlation between bitcoin spot prices and the futures market. As Gareth MacLeod, a partner in Gryphon Labs, an open source framework for cryptocurrency trading, said that the growth of Bitcoin futures is a sign that the traditional financial industry is beginning to generate greater interest in the encryption industry, and CME Group is creating a former cryptocurrency market. To the curve so that investors can better manage the price. Given the concerns of traditional financial institutions about the high volatility of cryptocurrency prices, futures contracts can better provide stability, reliability and reduce risk in large portfolios.

Unlike the traditional stock market, Bitcoin and other cryptocurrencies are open all year round and are always in a state of trading, while CME Group's Bitcoin futures products are only five days a week: from Central America time per week. It starts at 5 pm and ends at 4 pm every Friday – the problem arises here. Because of the time interval between spot trading and futures trading, there will be price differences, and these spreads need to be "filled in" with spot prices.

As shown in the above figure, the price difference will appear after each bitcoin futures trading is suspended (marked by a circle in the above figure), and these spreads need to be filled by the spot price (the same color circle in the above figure corresponds to the corresponding spread) ). Bitcoin trader Joe McCann explains this:

“In general, the transaction price reflects all the potential price ranges available between the buyer and the seller, so that the true value of the asset can be assessed more accurately. This may be a bit difficult to understand, in fact in many cases, futures prices and spot prices. The price difference between prices will continue to shrink until it finally disappears (because of short selling), but the rebound is higher. In the traditional market, “trading experts” (humans) will do this deliberately because they usually go for their own benefit. Manipulate the market price. As long as the futures price is long enough, the spread between it and the spot will eventually be filled."

As Joe McCann said, as long as there are interests, someone will manipulate the market price. Sometimes they don't even want to wait for "long enough" time to fill the spread, which seems to be one of the reasons for the frequent fluctuations in bitcoin prices.

Let us continue to analyze the recent chart of the above bitcoin price, taking the recent period as an example: the spread on June 23 was filled on July 2 (two purple circles in the picture above), June 29 and 30 The resulting spread was filled on July 4 (the two yellow circles above). Assuming all spreads are filled, the next "available spread" shown in the above chart is a spread of up to $1,000 from June $17 to $9,500. Without a surprise, this spread will be filled in the near future – but obviously no one knows the exact time.

This article comes from Ambcrypto, the original author: Akash Girimath

Odaily Planet Daily Translator | Moni

This article is translated from https://ambcrypto.com/bitcoin-cme-futures-price-action-plays-a-key-role-in-predicting-spot-prices-for-btc/ . Please indicate the source if you reprint.