Friday, 20 April 2018

Sell Bitcoin Ahead Of Futures Launch ? Says Algorithmic Expert

The article went on to note that the “few hundred guys” that drive bitcoin pricing “probably can call each other.


-Sunday's launch of Bitcoin futures is the first opportunity institutional investors will have to sell.

-It is unclear what will happen, but what is clear this is an unknown event.

-Algorithmic trading systems typically get flat ahead of statistical outliers.

As the debate over the legitimacy of bitcoin rages, most of it might not matter. On Sunday bitcoin futures will start trading on the CBOE, which will immediately inject a degree of institutional legitimacy into the product.

That advent of listed derivatives to bitcoin will be meaningful from several perspectives. But most materially for traders, now might be a good time to sell based on my algorithmic analysis. Here is why.

Bitcoin algorithmic analysis has been challenging if not impossible due to the lack of institutional players

Providing algorithmic analysis on top of bitcoin has been relatively difficult, if not impossible – until Sunday, that is. Because institutional traders – in particular, global market makers who arbitrage the price to keep it consistent – generally haven’t been in the market. This was most recently put on display Thursday, when the price of bitcoin in South Korea was 23% higher than it was around the world.
To algorithmic traders, such wide spreads between markets is often a sign of an immature market, one where institutional investors have not arrived… yet.

Institutional investors can move bitcoin markets with a shrug

Currently, 40% of the bitcoin market is owned by just 1,000 individuals, according to a Bloomberg report which noted:

A few massive investors can rock it with a shrug.” The article went on to note that the “few hundred guys” that drive bitcoin pricing “probably can call each other.
In an unregulated, global cash market, collusion on positioning among major players is a realistic possibility that anyone trading bitcoin must consider.

The low dispersion of ownership percentage is likely wetting institutional investors’ appetite as they are likely to reshape these markets to their liking – and the resulting price action will reflect this in specific ways should it occur.

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