Bitcoin Futures Expired Last Week, Did It Affect $10 Billion Plunge of Crypto Markets?

On Jan. 29, the valuation of the crypto market plunged by more than $10 billion within a 48-hour period, from $121 billion to $111 billion.

Last week, CME Bitcoin futures contracts in the U.S. market expired.

"The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. It is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset."

Futures contracts in the U.S., at least for now, are all cash-settled and as such, the supply of Bitcoin futures contracts is fixed, which restricts the effect it could have on the value of BTC. Bakkt, which is set to launch later this quarter, will become the first physically settled Bitcoin futures market in the U.S. Jake Chervinsky, a government enforcement defence and securities litigation attorney at Kobre & Kim, explained that physically settled contracts like Bakkt could have an actual impact on the price of the asset in the future.

Because the futures market is of significant size for traditional assets like gold, many investors attempt to correlate the expiration of futures and the performance of Bitcoin.

In the long run, if Bakkt sees a rapid increase in volume and, as a result, other large futures market operators - such as ErisX, CME, CBOE and potentially even the Nasdaq - experience exponential growth, the correlation between futures and the Bitcoin price on exchanges could increase.

It is currently not big enough to move the price of BTC. When the Securities and Exchange Commission rejected nine Bitcoin exchange-traded funds that were based on the futures market in August 2018, the commission the also stated that the Bitcoin futures market is not big enough to handle ETFs.

Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are 'markets of significant size.

In the short term, at least, the crypto exchange market will likely have a larger impact on the price trend of crypto assets over both over-the-counter and futures markets.

In the last days, following a steep sell-off on Tuesday, the crypto market rebounded by more than $4 billion.