Report: Bitcoin Bears Are Looking To Manipulate Price Below 60,000 Before Friday's Option Expiry Photo by: STRF/STAR MAX/IPx 2021 8/22/21
Bitcoin bears have their sights set on prices below $60,000 ahead of Friday’s $1.1 billion options expiry and hope the current price downturn is a chance to turn the tables on the bulls, who were caught by surprise when the No. 1 crypto lost 9 percent of its value in 24 hours on Nov. 16.
Bitcoin was trading at $56,830.04 as of this writing.
An expiry or expiration date in options trading is the point at which a position automatically closes. Traders must decide what they want to do with their open position before the expiry date. The owners can choose to exercise the option, close the position to realize their profit or loss, or let the contract expire worthless.
Most of the call (buy) options for Nov. 19 have been placed at $66,000 or higher. “At first sight, the $630 million call (buy) options dominate the weekly expiry by 35% compared to the $470 million put (sell) instruments. Still, the 1.35 call-to-put ratio is deceptive because the recent price crash will probably wipe out most bullish bets,” Cointelegraph reported.
Bears might have been helped by two negative events in the past week. On Nov. 12, the U.S. Securities and Exchange Commission turned down VanEck’s spot Bitcoin ETF request — not unexpected — citing uncertainty over Tether’s (USDT) stablecoin and the inability to deter market manipulation and fraud in Bitcoin trading. On Nov. 15, U.S. President Joe Biden sanctioned the signed off on the infrastructure bill, which mandates that digital asset transactions exceeding $10,000 are reported to the Internal Revenue Service as of 2024.
In March 2019, cryptocurrency asset manager Bitwise published an analysis for the SEC finding that 95 percent of Bitcoin spot trading is faked in all trading volume on 71 out of 81 exchanges analyzed. Just 5 percent of Bitcoin spot trading is not faked by unregulated exchanges, according to the Bitwise study. Bitwise was seeking to list Bitcoin exchange-traded funds (EFTs).
A single anonymous market manipulator is credited with causing Bitcoin to top $20,000 in the historic 2017 crypto boom, according to a forensic study by finance professors at the University of Texas and the Ohio State University. Almost the entire rise of Bitcoin at the time is attributable to “one large player,” wrote John Griffin and Amin Shams.
They found that Tether, a digital currency pegged one-to-one with a matching fiat currency, was being traded for Bitcoins in a pattern of manipulation during the 2017 crypto boom, CNBC reported in November 2019. Griffin and Shams followed clusters of data to a single source, one large account at Bitfinex — one of the largest digital currency exchanges in the world. The study found that, through Bitfinex, the single player manipulated demand for Bitcoin via “extreme” flows of Tether coins.
“One of the SEC’s top worries is that crypto is subject to manipulation. This study appears to lend credibility to that argument,” Cowen analyst Jaret Seiberg told CNBC at the time.
Carol Alexander, a professor of finance at the University of Sussex Business School, has written in the past about identifying Bitcoin option settlement manipulation. On June 26, 2020, she observed and shared her analysis of the timing of dips in the Bitcoin price on a day of options expiry.
“Given the obvious timings of those dips in the bitcoin price seen in the chart below, settlement price manipulation is a certainty,” Alexander wrote. “The resulting profits on those puts will have greatly exceeded the profits from the futures/perpetual manipulation.”
A downward Bitcoin price move in May 2021 to multi-month lows near $46,000 was attributed to fears of an early rate increase by the Federal Reserve and Elon Musk’s U-turn on accepting Bitcoin. However, options trader and Glassnode researcher Fredrick Collins said the action was likely aggravated by options market makers selling Bitcoin in the spot/futures market to hedge their books (offset bullish exposure).
“Market makers were heavily short puts in the range of $52,000 to $50,000, and I estimate were forced to sell nearly 2,900 bitcoin during the crash to offset the short gamma exposure,” Collins told CoinDesk in a Twitter chat. “That likely exacerbated the bearish move.”
The growing trade in cryptocurrency options “has become a force to reckon with for participants in the underlying spot market for Bitcoin, with monthly expiries proving to be a catalyst for price volatility,” Omkar Godbole reported for Coindesk in May 2021. “The fact that traders and analysts are starting to assess the cryptocurrency options market makers’ hedging activity reflects the derivatives segment’s growing relevance in the Bitcoin market.”
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
