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Valentine’s day, 14 February, might be another day for breaking news about Bitcoin and cryptocurrencies. On 14 February, the terms of the Bitcoin futures contracts are set to expire. After the rise of Bitcoin price – up to $8500 – it has the potential to fall again.
Analysing the market, we see that previously Bitcoin dropped on the 17 and 26 January when the first future contract expired. Future contracts have a significant impact on the cryptocurrency. Bitcoin skyrocketed to the $20 000 mark when the first news about futures was issued. The first futures were issued on the CBOE and CME.
When the first contracts expired on the 17 January, traders began to fix their profits, however amateur investors began panic sell as a result of the Bitcoin price drop to below $10 000, according to coinmarketcap.com. Among the investors there is an opinion that the expiry of future contracts was the reason for the price drop. That is why experienced crypto investors are now stressed about the new future contracts expiry. In the long-term perspective, we see that future contracts would not have such a big impact on the market as trades for Bitcoin futures are only possible on the CBOE and CME exchanges.
However, most of the traders are on the cryptocurrency exchanges. These were only the first futures and their expiry date was unpredictable, therefore most investors were acting emotionally. We expect this upcoming expiry of those first future contracts to bring more volatility, however, as mentioned, we think it is going to be less in the future.
According to Capital.com’s data on its traders’ activity, when the first future contracts were about to expire (15.01.18 -18.01.18 & 24.01.18 – 27.01.18) twice as many investors opened short positions on cryptocurrency. Moreover, after the market went down, a lot of investors were terrified and even fewer of them opened long positions. However, now the market is less sensitive to the futures expiration. As we are provided with the data concerning the cryptocurrency in general it is significantly important to understand that Future contracts have a big impact on altcoins as well. Whenever there are worries about bitcoin, a lot of altcoin capitalisation wipes out simultaneously.
It’s important is to mention the annual effect of the Chinese New Year, which also played a big role. The first future contracts expiry is assigned during the period of the Сhinese New Year. Cryptocurrency has a lot of Chinese players and during the holidays they make big purchases. A lot seem to cash out their Bitcoin, perhaps in order to use them to cover spendings. According to the Bitcoin graph, annually it goes either sideways or down through mid February, indicating this spending trend. This had a negative impact on the market because a lot of market capitalisation seemed to be wiped out and that brought panic to the market, which affected not only bitcoin, however altcoins as well.
In such occasions it is good to know that there is an opportunity to benefit as an investor, not only from price growth, but from price decline as well. Opening short (sell) positions on CFD (contract for difference) platforms, like Capital.com, is one way to do so. The benefits of trading CFDs on cryptocurrency with Capital.com include segregated accounts, account security and broker services, which are regulated by a financial regulator. It’s worth stating that trading is risky and you should not trade with money you can not afford to lose.