free web page hit counter The Cause of Today’s Chaos in Crypto Market

The Cause of Today’s Chaos in Crypto Market


The cause of today’s chaos is likely large hedge funds using expiring BTC futures contracts as safety nets to exploit the only sure-thing in this market: a large amount of new/overextended investors who are easily moved to panic sell during a flash-crash.

On December 10, BTC futures trading went live. The first set of those contracts is set to expire tomorrow, January 17.
For those who don’t know, futures contracts are agreements to buy/sell an asset (like BTC) at a specified future date and price. As the price of BTC was ~$15,000 on Dec. 10 , the first BTC futures contracts, which expire tomorrow, were fixed at about that same price. In a simplified form, this means that tomorrow:
the “short” side of those contracts must give the “long” side a BTC (which, if they don’t already have, could simply be bought at tomorrow’s market price); and
the “long” side of those contracts must pay the “short” side $15,000 in return.
Now imagine you are a large hedge fund evaluating these contracts, and the crypto market as a whole, on Dec. 10. Obviously, making a large bet on either the “long” or “short” side is extremely risky, since the price of BTC when the contracts expire (January 17) could very easily be $50,000 or $500. This makes large bets on either side a bad option for a large institutional investor like yourself.
However, you also know that crypto is still an emerging market with a large amount of new investors and “dumb money.” And because you are a large hedge fund, futures contracts opens the door to a third option: use large bets on both sides to manufacture market chaos and make money on the ripple effects with little to no risk. Here is how:
Bet big on the “short” side of the futures contracts on Dec. 10. Let’s say you do this for 10,000 BTCs. This means that on January 17 you will owe 10,000 BTCs to the “long” side of those contracts, receiving $15k per ($150,000,000) in return.
Buy an equally large amount of BTC on Dec. 10 at the market price ($15k/BTC). This cancels out your risk/reward for the futures contracts, making you essentially immune to changes in BTC’s price while you hold both the contracts and BTCs. This also allows you to accumulate and hold an extremely large portion of the BTC market while taking little if any risk .
Shortly before your futures contracts expire, dump all of your 10,000 BTC on the market at once. Like clockwork, this will trigger stop-losses and panic sells from the consumer BTC market, virtually guaranteeing that the BTC price will continue to dip well below whatever price you just sold those 10,000 BTC for.
Ride that dip you just created to buy back the 10,000 BTC for much less than the price you just sold them for. This is particularly easy, since the funds you need are already liquid and ready to get back in the market.
Use the re-purchased 10,000 BTC for the expiring futures contracts, which get swapped for your initial investment ($15k/BTC). The difference in the price that you sold the 10,000 BTCs to start the dip from the price that you bought the BTCs back during the dip becomes your net profit.
For funds with access to enough capital to move the crypto market, this play should be easy money. It would also explain the series of huge dips (seemingly out of nowhere) that we are dealing with today.
If I’m right about the cause (and I’m fairly confident that I am), the good news is that today’s dips are likely temporary/localized and not signs of a more serious issue with cryptocurrencies as a whole. The bad news is that I don’t know how this can be stopped as long as the prospect of capitalizing off of market fear remains a huge carrot for the sharks in this market.


Why is ETC (Ethereum Classing) going up so fast at the moment? - The Callisto Project

Callisto Project is coming up on March 5 2018Quick summary:It is not a hard fork, it's an airdrop. The difference is there won't be a shared history.Both chains will continue to exist.Those holding ETC at block 5.5 million (around March 5 2018) will receive an equivalent amount of CLO.If you want your CLO the safest bet is storing your ET...

Game-changer for Litecoin to be released

A "GAMECHANGER" for Litecoin will be released later this month with businesses expected to be able to accept the cryptocurrency "without worrying about price volatility", a financial expert has warned.Charlie Lee, Litecoin founder and former director of engineering at Coinbase, says transaction processor LitePay will be released on Februa...

Litecoin vs Bitcoin

Litecoin vs BitcoinLitecoin vs Bitcoin. Which one is better? Everyone from qualified economists to Redditors have been comparing the two since Litecoin came into existence in 2011.The conversation not only discusses these coins individually and against each other, but also pertains to a more complex debate over what it takes to become a s...

Trading Glossary

Bearish: An asset is bearish if the price is set to fall according to certain indicators or rules, or a person is bearish if he thinks that the price of an asset will decline. Bullish: An asset is bullish if the price is set to rise according to certain indicators or rules, or a person is bullish if he thinks that the price o...

An Introduction To Crypto

What is Crypto? A Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Note: Not all 'Crypto' companies are currencies. Many of them offer other services and their 'Currency' is actually...

Why is the price of cryptocurrency crashing today?

What drives crypto prices? The price of cryptocurrencies usually go up and down in line with news events. As you may have already noticed, whenever there is news that some big financial player signs a partnership with a blockchain company, that crypto’s price goes up. Consequently, when negative news hits the papers, prices go do...

AppCoins is Launching Today on Another Top 5 Crpto Exchange!

AppCoins(APPC) will be launched on Huobi Pro today and its planned to be also on Bittrex. AppCoins (APPC) has held its ICO and is up nearly 300% since being added to Binance. AppCoins is an open and distributed protocal for App Stores using blockchain technology and smart contracts. Servign over 200 milion users, AppCoin (APPC...