Bitcoin Futures to Blame for Crypto Market’s “Gut-Wrenching” Drop, Says Fundstrat Analyst Tom Lee

Omar Faridi
  • Fundstrat analyst Tom Lee wrote that bitcoin futures reaching their expiration dates are to blame for the cryptocurrency market’s recent drop.
  • The data science expert believes that institutional investors have not made substantial investments in the cryptocurrency market due to a lack of proper tools.

Fundstrat Global Advisors co-founder Thomas Lee recently stated that the sharp drop in bitcoin’s price may be linked to the expiration of bitcoin futures contracts. According to Lee, the “significant volatility” of the flagship cryptocurrency could be due to CME and Cboe futures having reached their expiration dates.

Moreover, the data science expert believes that while technical issues and market sentiment have been “awful”, the expiration of bitcoin futures might have played a bigger role in the decline of bitcoin’s market capitalization. The Fundstrat head of research said:

“Bitcoin sees dramatic price changes around CBOE futures expirations. We compiled some of the data and this indeed seems to be true.”

Tom Lee

Lee pointed out that since Cboe’s bitcoin futures contractswere introduced in December 2017, they have expired six times, with the most recent one expiring on June 13. Citing Raptor Capital Management crypto investor Justin Saslaw’s analysis, Lee thinks that the drop in bitcoin’s price can be attributed to the expiration of bitcoin futures contracts.

In his report, the Fundstrat analyst notes that bitcoin's price fell approximately 18 percent 10 days prior to the financial products’ expiration, followed by a recovery felt 6 days after expiration.

“Handsome Profits” Shorting BTC Futures

Lee noted that should people short bitcoin futures as they approach their expiration date and go long on the cryptocurrency, investors could sell a big portion of their holdings at volume-weighted average price (VWAP) with a minimal tracking error.

He also added that the bitcoinsleft could be sold as the expiration date approaches, which would result in declining prices. This way, those who short futures could end up “with a handsome profit”, Lee says.

Commenting on the current cryptocurrency market, the Fundstrat analyst stated that tools to attract institutional investors have not yet been properly developed, which has kept them from investing. He also wrote that numerous initial coin offerings (ICOs) and large amounts of cryptocurrency earned by miners, along with taxed capital gains, have resulted in a significantly greater net supply this year. Notably, Lee has in the past stated he sees bitcoin hit $25,000 by the end of the year, and $91,000 by March 2020.

Interestingly, Lee’s report has come at a time when the US Commodity Futures Trading Commission (CFTC) launched an investigation into four large cryptocurrency exchanges: Coinbase, Kraken, itBit, and Bitstamp.

All four exchanges have been sharing their financial data with the CME Group, which introduced BTC futures in December 2017. The CFTC probe is reportedly due to allegations regarding potential market manipulation.

North Korean Hacking Group Reportedly Raises Efforts to Steal Cryptocurrencies

Michael LaVere
  • A new report warns N. Korean hacking group Lazarus has turned its focus towards stealing cryptocurrency.
  • Lazarus became infamous in 2014 for its hack of Sony Pictures over the release of The Interview. 

A North Korean hacking group has reportedly turned its focus towards stealing cryptocurrency as the country’s economy struggles from the impact of the COVID-19 pandemic. 

According to a report by Daily NK, the North Korea-based hacking group Lazarus has increased its effort to steal cryptocurrency. The group first became infamous for its hack of Sony Pictures in 2014 over the release of the movie the Interview. Lazarus was also responsible for the high-profile Bangladesh Bank cyber heist in 2016. Lazarus is suspected of being behind several high-profile cryptocurrency exchange hacks.

ESTSecurity, a cybersecurity firm located in Seoul, warned the hacking group was now focused on stealing cryptocurrency.

The report reads, 

Lazarus is carrying out [adaptive persistent threat] APT attacks not only in South Korea but also in the international sphere, including the United States. They are also engaging in cyber-espionage operations as well as activities designed to generate foreign currency.

The hacking group is using malicious emails disguised as updates from cryptocurrency payment services in order to infect user devices. 

According to the Daily NK report, analysts are warning that stealing cryptocurrency could bring “enormous profits” to North Korea, amidst the desolation of the coronavirus pandemic and economic sanctions imposed on the country. 

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