Issue 13 – The Significance of Q2 Bitcoin Futures Expiration

June 9, 2021


What a difference 24 hours can make.

Yesterday we were watching Bitcoin and the rest of the crypto market plunge below crucial support levels.

Fast forward to today, and everything is nice and green.

Is today’s rally sustainable?

Only time will tell, but there is a critical area on the BTCUSDT daily chart that could offer some clues.

I’ll discuss that, and how the second quarter (Q2) futures could play a role in Bitcoin’s pullback and what that might mean for later this month.

We’ll then analyze a few charts to wrap things up.

Let’s get it!


The Bitcoin Pullback and Q2 Futures Expiry

Bitcoin futures are a blessing and a curse.

The introduction of Bitcoin futures was a significant moment in that it signaled a maturing market. BTC futures also provide additional liquidity to the market.

On the other hand, futures contracts attract deeper pockets (whales) and institutions.

But didn’t most crypto enthusiasts want institutions involved with Bitcoin?

They did, and many still do.

Institutional involvement in Bitcoin signaled a maturing market, but it also marked the beginning of a new era.

You see, monthly futures contracts expire on the last Friday of each month. Anyone holding such a contract has to take action before expiry. The most common action is called “offsetting”.

Offsetting is a fancy way of saying buying if you’re short and selling if you’re long.

With that in mind, it’s no surprise to see that for most of 2021, Bitcoin has changed direction on or near the monthly futures expiration date.

Bitcoin monthly futures expirations

It’s clear to see how these whales and institutions have covered their short positions near the end of each month.

The April expiry was a little off, but January through March marked the lows almost to the day.

So, what happened at the end of May? Why didn’t Bitcoin rally as it did so many other times?

To try to answer that, we need to acknowledge the presence of quarterly futures.

Like monthly futures, quarterly contracts begin and end with each quarter instead of a month.

The second quarter began in April and ends in June.

What’s interesting about this is that Bitcoin began this correction just 14 days into Q2.

Bitcoin Q2 futures duration

Is there a chance the market is moving in concert with quarterly futures as well as monthly?

I think so. At least that’s my theory.

Whether that theory has merit will depend on what happens between now and June 25th. That’s when Q2 futures expire.

If it’s significant, we should see Bitcoin and the rest of the crypto market find a bottom between June 20th and the 25th.

The 20th is significant because that’s the Sunday that kicks off quarterly expiration week.

However, it also means cryptos may continue to struggle until then.

It’s only a theory for now. But given how monthly futures have dictated Bitcoin’s direction in 2021 and the timing of this correction in Q2, I think it’s a theory worth considering.

Total Crypto Market Cap (TOTAL)

The total crypto market cap (mcap) is my barometer for the health of the market.

It’s not perfect, but it usually offers a clearer picture of where things stand than any single cryptocurrency, including Bitcoin.

And right now, the market is (still) bouncing from the parallel that extends from the August 2020 highs.

I’ve discussed these parallels and their significance at length on Twitter.

Just yesterday, I mentioned how $1.5T was support and that a daily close above it would keep it as such.

Tuesday’s session closed at $1.496, which is good enough for me, which is why the market is higher today, at least from a purely technical perspective.

It’s unclear whether the market can continue to trade above this parallel.

If it does, the total mcap chart would need to close above the $1.8T resistance area to open the door to the next parallel between $2.2T and $2.3T.

Alternatively, a daily close below support at $1.5T would signal weakness and expose channel support close to the $1T mark.

Today’s rally is a positive sign, but buyers still have work to do.

Total Crypto Market Cap (daily time frame

Bitcoin (BTCUSDT)

Bitcoin has clawed its way back to the symmetrical triangle support near $36,000.

That’s where BTCUSDT broke down on Monday.

It’s also the area that Bitcoin has to climb above on a daily closing basis to show signs of strength.

Remember that the daily close is at 8 pm EST. Check this site: dailyclose.com for an easy way to keep track.

If BTC can get above the $36,000 to $38,400 area, we could see at least a short-term rally toward $42,000 and perhaps $47,000.

If today’s rally fails to close above that region and gets rejected instead, it’s back to $30,000 we go.

Today’s rally from the crypto market is constructive. It’s a much-needed sign that solid demand exists at these levels.

Whether it’s enough to put an end to the correction is yet to be seen.

If the quarterly futures I mentioned above are any indication, we won’t see a true bottom until later this month, perhaps between the 20th and 25th.

It’ll be interesting to see how this plays out regardless.

BTCUSDT (daily time frame)

Ethereum (ETHUSDT)

ETHUSDT is testing the lows from earlier this month. It’s also approaching a critical resistance area between $2,750 and $2,900.

That’s the location of the May horizontal resistance level and the May 23rd trend line that broke down on Monday.

I’ll be using that area, specifically $2,900, to determine whether the recent breakdown is a false move or not.

If it is, we should see ETH close a day back above $2,900. That would open up $3,200 and perhaps $3,560.

However, if Monday’s breakdown is significant, ETHUSDT will get rejected from the $2,900 region (if tested) and move lower from there.

The market needs to do the work now.

As for support levels, Tuesday’s low near $2,300 will undoubtedly play a role, but the next key level, at least for me, is just above $2,000. Notice how ETHUSDT never closed below that area in May.

ETHUSDT (daily time frame)

VeChain (VETUSDT)

VET is bouncing today with the rest of the crypto market after a late Tuesday rally.

In yesterday’s issue, I mentioned how a Tuesday close inside of Monday’s range could trigger a bounce.

However, VETUSDT is currently trading in the middle of its recent range.

I can say the same for most cryptos right now.

Until we see a close above $0.155 or below $0.085, the near-term direction is unclear.

Above $0.155, and VET will have to deal with the channel resistance near $0.18.

A daily close below $0.085 would open up the region between $0.04 and $0.05.

I’m still bullish on VET through September as I don’t believe the bull run has concluded. But I’m also not willing to rule out lower prices in June while the market is sideways.

VETUSDT (daily time frame)

Justin Bennett

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About the Author

I'm Justin Bennett, a currency trader turned crypto enthusiast. My journey started with stocks in 2002. After limited success, I transitioned to currencies in 2007, which later became a full time trading gig. The journey continued, and in 2020, I committed to learning about cryptocurrencies. It was love at first sight. Cryptocademy.com is the culmination of my love for cryptocurrencies, my passion for financial markets, and desire to learn and teach.

  1. Great stuff Justin!

    It's really good value for money to sign up for your newsletter.

    Do you think you can share some sneak preview of the upcoming topics (at least for the next week or even month)?

    1. Thanks, Jerrick.

      Not exactly because most of it is based on current events or questions that get asked along the way. That said, everything from how to analyze an investment to some long-term picks from me will be up for discussion.

  2. Great read, thank you. I'm a big believer in VET; will hold onto it beyond this cycle

  3. Spot on as usual, thanks for keeping it simple, I appreciate the detail. Your point of quarterly expirations is the real key here. Small rallies are great , but the big picture is this full bull run, time will tell. Awesome content.
    P.s. you answer a lot of questions, anyway to get likes so you can address the ones that are important to most as your group grows. Just a thought.

  4. Great work Justin. Looking forward to get more about Crypto. I follow ur FX analysis too. You are too good. Thanks!

  5. Awesome, spot on as usual. I feel so much better getting this daily, I need repetition (the best teacher) I would be lost on total t/a without your explanations. Thank you. Looking forward to a long relationship’.mahalo Justin

  6. Thanks JB! I always look forward to your TA. Very appreciative of your work.

  7. I like your barometer of total MC. On Tuesday it went below 1.5 and instead of further correction why we went up? Do we need to look for weekly close below it or daily ?

  8. I think there is some credence to your theory of the market moving in concert with quarterly and monthly futures. The week of June 25 should be telling.
    Great job on the analysis, and supporting your arguments.

  9. Great outlining and commentary on where crypto is going. I love getting your notifications about forex and crypto as they are easy to understand and follow. Always accurate with the right amount of detail to ensure a smoother trading experience

  10. Hi Justin,
    really interesting piece, and certainly worth tracking, this is why your the “BOSS”
    Respect

Comments are closed.

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