Cryptocurrency Derivatives Series: Has Bakkt Failed To Cushion With Derivatives Stimulus? CME BTC Futures on Track of Short Hedging Motives

Bitcoin price slides past $8.5k as we are heading into 4thday of Bakkt’s BTC Futures launch.

The bearish sentiments are clearly visible despite Bakkt’s launch as per the schedule. Bakkt had a tepid start as it shows just 76 bitcoins have been traded so far.

Bakkt twitted that “price discovery unfolding before our eyes, on our second day of operations, totally transparent trading in monthly Bakkt Futures Contracts shows Bitcoin ending the day at $8,560 on 166 lots changing hands.”

We reiterate that Bitcoin derivatives market has been getting new dimension after the introduction of the latest instruments like Bakkt’s BTC Futures, and news of CME’s bitcoin options in Q1-2019, no doubt about it.

However, the real cause of concern is that on the back of such constructive news, the underlying price of bitcoin (BTCUSD) has slid below $8.5k levels, the pair has shown price dips over $1662 or (-16.59%) in this week so far.

On the daily plotting of Bitcoin CME futures price chart, although hammer pattern candlesticks at the bottom showed some minor strength in the interim rallies, could not sustain at $12,500 areas. 

Contrary to these upswings, the decisive breach below descending triangle support is functioning effectively as we predicted in our recent post.

We also traced out shooting star patterns at $11,830 and $10.460 levels, consequently, the bears nudge the bitcoin futures prices below 7 & 21-DMAs again. Amid these bearish sentiments, the minor trend breaches below descending channel support which is again a bearish indication, thereby, the short-term rallies now seemed to have been absolutely exhausted.

While the prices on a weekly-terms, back-to-back hanging man and shooting star patterns have occurred at peaks of rallies. 

As a result, price slumps are in tandem with the bearish signals as predicted in our recent post. The current price is now trading below 21-EMAs, and shorts in CME BTC of September month deliveries have been advocated, with the strong support at $9,192 - $9,359 levels being broken, we now wish to roll-over these shorts for October month deliveries as we could foresee further downside risks at this juncture (spot reference: $8375). 

Unlike Bakkt, these CME BTC futures contracts prices are cash-settled, would usually be subject to the CME CF Bitcoin Reference Rate (BRR) for the financial benchmarks. Renowned exchanges, such as GDAX, Bitstamp, Kraken, and itBit are the constituent exchanges to provide the required data for computation of BRR.