A Wall Street strategy firm think that they have the reason behind Bitcoin’s massive decline in price this year.
The founder of the firm Fundstrat, Tom Lee, recently wrote to clients and suggested a reason for the Bitcoin‘s recent price tumble which has been a massive 30% in the last month and a whopping 50% in the last year. He thinks that there is a link between the drop in price and the launch of the Chicago Board Options Exchange (CBOE) bitcoin futures which happened in December.
According to CNBC, Lee said that “Bitcoin sees dramatic price changes around CBOE futures expirations. This was something flagged by Justin Saslaw at Raptor Group. [The research team] compiled some of the data and this indeed seems to be true,” and that overall the cryptocurrency “has fallen 18 % in the 10 days prior to CBOE contract expiration.”
Lee also noticed that there were two exceptions:
- In February when prices were up by 15% which was owing to tax selling and
- In April when prices were up by 16%.
He pointed out that the CBOE bitcoin futures contract for June expired on Wednesday, and this resulted in prices hitting another significant low point this session.
Lee also added in a broader observation, “there is significant volatility around these expirations. And on average, the price recovered by day six [following expiration].”