fbpx

‘Striking’ Bitcoin Research Points To ‘Significant’ Price Manipulation

Bitcoin and cryptocurrency markets are in turmoil tonight after the disappointing launch of the hotly-anticipated Bakkt crypto platform.

The bitcoin price shed 15% of its value this week, with some of its biggest rivals including ethereum, Ripple’s XRP, litecoin, and bitcoin cash, recording losses as high as 22% as investors balked at Bakkt’s low bitcoin trading volume.

Now, new research has found a “striking systematic trend” in bitcoin price movements, with bitcoin falling far further than average ahead of CME’s bitcoin futures contracts being settled each month.

Bitcoin has dropped on average 2.27% towards settlement each month, compared to an average fall of just 0.06% on a random day over the same period, bitcoin and cryptocurrency analysts at Arcane Research found.

Adjusting for “large outliers,” researchers found the average price movement up 0.04%, while for the period before CME bitcoin futures contracts are settled the price falls by 1.99% on average.

“Statistically, it is highly unlikely that the price falls in advance of CME settlement should be caused by mere coincidence,” Arcane’s Bendik Norheim Schei wrote.

“The figures thus support a hypothesis that the bitcoin price is manipulated in advance of CME settlement. However, the figures do not say anything about deliberate manipulation or, for example, only a result of investors’ strategy of hedging,” Schei added, acknowledging “other factors” could “potentially explain the pattern, or show that it is even stronger,” and calling for further analysis.

CME, a Chicago-based financial markets company, began offering bitcoin contracts at the peak of bitcoin-mania in December 2017, to much fanfare.

CME’s bitcoin futures settle in cash, unlike the new “physically” settled bitcoin futures traded on Bakkt, which has led to accusations traders are playing the system by betting against the bitcoin price with these futures contracts, a practise known as shorting.

“These futures contracts are optimal for manipulation. They are settled in dollars and not in bitcoin. The price for the settlement is determined by the bitcoin price in the underlying market. Thus, it is never actual bitcoin that change hands, and it is just an overlying market traded in dollars,” Schei explained.

Some bitcoin and crypto market watchers are hoping Bakkt’s bitcoin futures will gain popularity and steer investors away from cashed settled contracts.

However, with only 72 bitcoin traded on Bakkt on its first day, compared to several thousand traded daily on CME, there’s a long way to go.

Also interesting

Leave a Reply