Trading Tip `The Wall´ - Why Do We Fall, Bruce?

This week, the price of bitcoin reached a low-point of -53% from its December high. A few weeks ago, I wrote about the Death of the “Get in before Wall Street!”-meme and why it made sense to Short the Great Bitcoin Bull. My viewpoint remains unchanged in that I’m still confident that the CME bitcoin futures listing was a core ingredient causing the bull run up to $19,891, as well as the recent fall down to $9,017 (Gdax). In this post, we’ll take a look at the stats from the bloodbath’s aftermath.

Also read: Trade Like You’re John McAfee

Trading Tip `The Wall´ - Why Do We Fall, Bruce?

The Great Fall and Futures

This diagram shows the CME bitcoin futures trading volumes for the first month since their listing. During this month, 27,390 contracts were traded, which accounted for positions totaling 136,950 BTC (5 BTC per contract).

Upon CME entering the market, it was speculated that Wall Street would take charge over the price discovery of bitcoin. The futures market (CME) and the spot exchanges (e.g. Gdax, Bitstamp, Bitfinex) are indeed interconnected through the actions of arbitrageurs and market makers, so there is no flaw in that thinking. But at 136,950 BTC per month, the CME volumes are currently too low to have any noticeable impact on the market on their own accord. As a comparison, this Wednesday alone 128,631 BTC was traded on Bitfinex.

There however a certain signal value to the CME market action which may influence traders other ways. The clearest example of such a thing I’ve seen was during the initial hours of the Cboe bitcoin futures launch on Dec 10, where Cboe Read More Here