Bitcoin Falls on Expiry Friday – Trustnodes

Bitcoin Falls on Expiry Friday – Trustnodes

Bitcoin fell by circa 10% from about $58,000 to a brief $50,500 before somewhat recovering to $52,000 at the time of writing.

After a brief jump to $57,000 following the Tesla announcement yesterday, bitcoin began turning downwards at around 6PM London time.

Bitcoin price, March 2021

Canada, which includes LA and the west coast, kind of bought bitcoin for a bit when they woke up at 5PM London time, but then began the sell off.

Curiously, both Shanghai and Europe continued that sell off, as well as NY this morning, leading to bitcoin breaking down some key support lines, like $54,000 and $52,000.

It also led to huge liquidations of longs at some $2.6 billion, the biggest such liquidation since the 21st of February.

Bitcoin longs rekt, March 2021
Bitcoin longs rekt, March 2021

The reason is probably because futures expire tomorrow at 4PM London time. Therefore those that were long on contractual futures or on options may have closed them.

A long as you might know is a borrowing of fiat to buy bitcoin at a certain price. If the price rises, then you sell the borrowed bitcoin and so repay the fiat loan, while keeping the profits.

Meaning these longs closed, both voluntarily and those liquidated, amount to a somewhat significant sell off of bitcoin in a fairly short time frame anchored on the contracts expiry date.

Call options are likewise a bet the price will rise, with the seller of the call option being the one that hedges their position by buying bitcoin just in case it does rise.

So once the call option is closed, the provider of it no longer has much need for the coins, and thus practically closing a call option also amounts to selling bitcoin.

The reverse is the case in regards to both shorts and puts, but more have been long than short this contractual month, and so we get a downwards rek.

Not necessarily always as that would be too easy and because these futures or options are not themselves a price setting market.

Instead they’re like betting on a horse race, with the horse in this case being an index composed of the average price of spot exchanges like Coinbase and Kraken.

While in a horse race your bet technically has no influence, here your call or even long can have influence because they are hedged in spot exchanges which thus moves the price.

In addition there can be front running which here arguably began on Monday. Wednesday is usually the day, and Tesla almost rekt them, but Wall Street got its way in the end.

Thursday then is generally the -10% peak, and generally from here on bitcoin recovers as contracts clear for the new month.

Meaning the new el concerto should begin soon with the big question being of course whether bitcoin gets to 69 this April.

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