FxWirePro: BTC/USD bears threaten at wedge resistance with potential shooting star – Stay hedged ahead of expiry of BTCG19 CME futures

Bitcoin price extended its recent rallies after it broke-out decisively the resistance zone of $3,675 - $3,750 mark against the US Dollar. BTCUSD price has surpassed $4k mark to extend bullish streaks and hit 6-weeks highs (refer above chart). In this process, the minor trend of this pair has formed a wedge pattern. Although the current price spikes above 7-DMAs with bullish crossovers, failure swings are observed at wedge resistance, shooting star pattern candle has occurred at this juncture (at $3,989.9 levels). The most likely shooting star is popping for the day. We observe buying momentum, but the same has been shrinking away ahead of the expiry of BTCG19 CME futures.

Well, it is already been highlighted, we reiterate that this 22nd February, the latest round of BTCG19 CME futures (contract started on December 3rd2018) expires.

The nature of futures contracts would imply that they need to be settled on a set, predefined date, based on a contract. 

All CME contracts will have to be traded, or settled, before this date. There is generally a fall in the trading volume of futures around expiration dates, that coincides with a rise in volatility and potential short/long squeezing.

It is quite a rationale approach to empathize that the underlying asset (Bitcoin price) influences the price of the futures contracts in one or the other way. Any considerable gap in prices between these two is because of the arbitrage. Well, if the futures contract seems to be exorbitantly priced-in than the underlying price itself, then traders can buy the underlying asset only (Bitcoin in this case) and short the futures contract.

Because of the turbulence or uncertainty of the underlying asset price as explained above, the investors can buy a futures contract which allows the buyer to hedge the price exposure. Hedge fund clients are advocated to stay long hedged of mid-month tenors in this crypto-asset to fetch handsome yields by mitigating risk factor of the market volatility.

Currency Strength Index: FxWirePro's hourly BTC spot index is inching towards 69 levels (which is bullish), while hourly USD spot index was at 14 (mildly bullish) while articulating (at 07:35 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex