FxWirePro: How do hedge fund companies crack Bitcoin price perplexity? Predict bitcoin price using BTC futures contracts

Although we’ve seen exponential capital appreciation in BTCUSD, the same has the terrible start to begin with 2018 which is the prominent appeal for the hedge fund companies that make money regardless of bullish and bearish trends, can it be possible even in cryptocurrency avenues?

Would you like to know the buzzing fact? And the buzzing fact is that the funds specializing in virtual currency market making and arbitrage strategies delivered first-quarter gains even as their mostly bullish peers lost 40% on average.

It is the general consensus that such investor class sentiment would certainly influence decisions to buy or sell bitcoin futures and, as a result, impact underlying Bitcoin pricing. Subsequently, the Bitcoin futures bull/bear ratio plays the pivotal role of an important indicator which could be utilized to speculate Bitcoin price trend.

Price shift would positively be correlated with investor perception. For an instance, by now, you might have probably seen the huge slumps in Bitcoin prices since the mid of last December which was absolutely because the crypto derivatives markets began allowing shorting mechanism at CME. 

Hence, the bull/bear ratio signifies investor sentiment representing an optimistic or pessimistic view of the market. A ratio greater than 1 indicates more long positions than short positions showing an optimistic market view, whereas a ratio less than 1 signifies more short positions and an expected price decrease. Evaluating CFTC data, we are able to track investor speculation on underlying Bitcoin pricing.

Usually, in a free economy, the demand/supply equation defines prices. The spot price of an underlying asset (which is bitcoin) is the price at which buyers and sellers exchange BTCs for the immediate delivery. Futures contracts defer the exchange and payment but not the pricing. The delay is called the term of the contract and ranges from one month to several years. Normally, contracts with longer terms cost more than do short-term futures or spot prices; this is called a normal market. An inverted market has lower prices for distant contracts, indicating rising supply or falling demand over time.

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