CME Bitcoin (BTC) Futures Squeeze: Shoe is on the Other Foot

December 20, 2018 / by Bill Noble

At Crypto.IQ, we have written extensively on the negative impact of the CME Bitcoin (BTC) futures contract. Our work shows that open interest in this Bitcoin (BTC) futures contract is at an all time high. This likely means that there are massive shorts in the contract as miners and hedge funds have used this contract to artificially crush Bitcoin (BTC). The futures contract allows for the creation of “paper Bitcoin (BTC).” That allows for more selling pressure than would actually exist in the Bitcoin (BTC) spot market.

Looking at charts, the pendulum is swinging in favor of the bulls. It seems logical that institutions, who are short the CME Bitcoin (BTC) futures contract, are going to have to buy the contracts back to book what profits they have before year end.

Thus far, the volume on the rally off the lows is nowhere near the volume that occurred when Bitcoin (BTC) broke down below $6,000. That could mean that there are a lot of short contracts that still need to be bought back (Figure 1).

 class=

So, the shoe is now on the other foot. Huge amounts of paper shorts can now drive prices higher — perhaps higher than you might expect. This could be one reason why dips are so limited.

Bottom Line: Given this setup, we can see a huge price spike on Christmas Day. With the futures market closed, Mr. Market can torment shorts by ramming Bitcoin (BTC) higher when the futures market is closed. Futures contract shorts ruined Bitcoin (BTC) and caused major damage to the crypto space. So if their Christmas gets disrupted by a vertical ramp in Bitcoin (BTC), all we can say is that it couldn’t happen to a nicer bunch. Even though it’s the holidays,  Crypto.IQ trading room will be working to keep track of such events. Join us there for some holiday cheer.