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Reasons for the recent Bitcoin (BTC) price drop



Why the price of bitcoin is falling during these days approaching the end of November 2020?

Actually, rapid and steady rises are often followed by falls, sometimes equally fast and sustained, and since the price of bitcoin in recent weeks had risen a lot, there was definitely a correction in the air.

Even more since the fear and greed index of the cryptocurrency markets was actually at very high levels in recent days, probably too high. These levels are difficult to maintain for a long time, so the hypothesis of a correction was more than likely.

In addition to this, there was some potentially worrying news for the US cryptocurrency markets today, namely the possibility of enforcing by law the identity verification of holders of non-custodial wallets to whom withdrawals are made from exchanges. .

Futures explain why bitcoin price is falling

But there is another factor that has probably affected the sharp drop in the price of bitcoin today, namely a phenomenon that has already produced similar results several times in recent years.

In fact, ten times in the last two years at the end of the month the price has dropped more or less significantly.

The fact is that the last Friday of the month CME bitcoin futures contracts expire, and these are often used by large investors to speculate on the price of bitcoin.

Tomorrow, November 27, 2020, November contracts expire, so today's decline may also have something to do with this expiration.

Something very similar happened for example in January, April, June, July, August, September, November and December 2019, and in February and May 2020, that is, ten times in the last 23 months, with falls that lasted from 1 to 4 days, often a few days before maturity, and between -3.7% and -19.4%, with an average of -10.2%.

Therefore, for almost half the time in the last two years, a few days before the expiration of the CME bitcoin futures, the price decreased on average by 10%.

It seems that November 2020 was no exception.

We must also add that these falls have not always been followed by recoveries, although in February and May of this year in both cases, the days following the end-of-month fall, the price rebounded slightly upwards, despite the collapse of the world financial markets in March.

Given the setting, these month-end drops should be considered systemicalthough they have become rarer in the last eleven months.


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