Peter Brandt, a prominent trader and respected technical analyst, believes there is no solid evidence to back up claims that whales and large-scale investors have been manipulating the bitcoin price or the wider cryptocurrency market.
Not Futures Market
Earlier this week, after various reports that the fall of bitcoin’s value coincided with the launch of CME and CBOE bitcoin futures market in December 2017, Brandt said:
“Cryptos. There is no evidence whales have been shorting crypto markets. The weakness in May appears to have come from liquidation of longs by small spec retail traders.”
Brandt added that it is not possible for the futures market to have an overwhelming impact on the bitcoin price because there exists a fixed number of short and long contracts. “There are always the same number of short-contracts as long contracts. Always. No matter the market,” explained Brandt.
Since December 2017, the point in which CME and CBOE bitcoin futures market were introduced to the public, the bitcoin price dropped from $19,900 to $7,500, by more than 62.3 percent. The sharp decline in the price of bitcoin led investors and analysts to suspect manipulation in the futures market, which still remains as one of the very few public instruments investors can utilize to invest in the cryptocurrency market.
However, Brandt stated that it is not possible for any futures market to see a continuous decline of value and overwhelming support from bears because the quantity of short and long contracts are available is identical.
If the futures market had the same leverage it had in December throughout 2018, the price chart of bitcoin should have had demonstrated similar volatility and intensified downward movements. But, bitcoin suffered three major corrections in 2018, and each successive correction recorded lower sell volumes and drops.
A bitcoin trade group echoed a similar sentiment to Brandt in a popular bitcoin price discussion, as it stated that the decline in sell volumes in succeeding corrections after the initial drop in the bitcoin price in January show that the bear trend is “running out of gas.”
“Not only is selling volume lower, but the drops have been less severe. Each component of each leg down is less steep than the previous leg down. RSI, a momentum indicator, also shows selling has been less extreme. The trend is ‘flattening out’ In our opinion, the bear trend is running out of gas. Bears/whales/market makers held a great supply of BTC that they pumped until 12/17/17,” the trade group said.
If the bitcoin futures market had been the main factor behind previous corrections, traders should have been able to gain similar leverage in successive corrections. However, bears have continuously lost leverage over the market, which was likely triggered by the liquidation of longs by small retail traders, as Brandt suggested.
Flattening Out Process
After the flattening out process comes to an end in the upcoming weeks, bitcoin will likely experience a strong rally that will expand throughout the mid-term. In the short-term, due to the intense volatility of the cryptocurrency market and the downward trend of bitcoin, it is possible for bitcoin to fall below the $7,000 mark to the lower end of $6,000.