ICBF investment strategist Dmitrii Muradov speaks on how to earn on "bearish" and "bullish" futures and on the prospects of prices in the market of cryptocurrencies.

At this time, I want to talk a little bit about futures for Bitcoin and their impact on its price rates, and, consequently, the entire cryptocurrency market in general.

Let me offer you this opinion in the framework of our discussion. Much to the general disappointment of crypto enthusiasts, the opening of the trading of Bitcoin futures in December 2017 on the American CBOE and CME sites did not send Bitcoin "to the moon," or to a price of $50,000 apiece and higher, as the old-timers expected, but, on the contrary, arranged a steep and protracted peak, knocking two thirds off of its price by the end of the first half of 2018.

Big money, as expected, has already come to the market, but it was not institutional, that is of the serious investment kind for the long run, but rather speculative and fast money aimed at breaking the jackpot here and now.

Next, over a six month period, we have an oil painting. A painting of despair for some, and of luring, manipulating, and rubbing hands tired of recounting fresh cash for others (see graph).

So, let us try to figure out the situation. We will call the January futures bearish. Bears, as it should be for the first time, besieged the bulls and the entire Bitcoin market from $17,000 to $9,000 and below. The following month, the futures were bullish. After reaping their glory, the players who dumped Bitcoin in January pumped and took their profits at the time of February’s expiration in a wave of general euphoria. It was the old scheme from there on. March’s expiration date came with another dump and the extrusion of those who had bought on highs with the closure of the futures by the end of the month. April brought earnings on bullish futures. Further on came the continuation of the scheme of a general dilution by big capital, with the only difference being that at the end of June it was necessary to close the semiannual "short" futures taken at the beginning of the year. Therefore, there were two months of irrevocable and hopeless declines all the way until June 29—the date of expiration.

What is next? Now we could safely hope for the same growth continuing, if not for two consecutive months, then at least in July. Until the end of its first week, however, I would suggest that not everything is so unambiguous as the new direction of the market has not been well established. The current slight increase in the rates of the main cryptocurrencies, which started on June 29, was just the result of closing not only the monthly but also the semiannual futures with the expiration date already set. In addition, the time has come to summarize the semiannual results of the work of the funds, fixing profits, and redistributing the investment funds. Naturally, for all this, it was necessary to close the current short positions in the market, fixing the profits, and buying Bitcoin. The indicated growth reflects a similar fixation of the bearish profit.

The steady continuation of growth and the technical analysis of the schedule of Bitcoin’s price changes is also not yet promising. Based on its current state, it would be possible to ascertain some struggle for the height of $7,000 in relation to a small number of "half-eaten bulls" against a huge and still half-sleeping pack of "well-fed bears" resting on their laurels of victory. Even here, however, there is still no struggle to be had. Moreover, it is likely that we will now manage without significant bullish victories, and the capture of this height will not take place. At the same time, the bears that have woken up by the middle of the month are again able to route the remains of the scattered and minute bullish forces to $5,800 to $5,500, and possibly even lower (see graph).

This is facilitated by the continued decline in trading volumes and the turnover of leading crypto exchanges, and the previously-indicated absence of any buyers or a principled desire to buy. The lack of new monetary inflows to the market will not be able to support a bullish extravaganza, or even moderate growth in the medium term. To summarize, due to the current affairs in the market, a sad and disappointing time of stagnation is ahead.

But let us talk a little about the future prospects of market movements from the point of view of its main players and try to find at least some prerequisites for possible growth. At the moment, in order to properly earn on bearish monthly futures again, we must significantly push the price down to the date of its expiration from the current values. At the same time, the greedy bears that closed their positions at roughly current prices, of course, would like to lure the remaining bulls above these values at the outset in order to make it easier and, most importantly, add greater subsequent benefits.

You can, of course, turn into The Guns of Navarone and apply serious pressure right now with current price values, but using poker terminology, most of the "weak hands" have already dumped, and those remaining behind the table will be quite reluctant to disclose their bluff and "drain" their scanty remnants in the hope of seeing that treasured and long-awaited Bitcoin card from the deck with a price of $20,000. And, it is better to do it earlier than never, of course, and maybe even before the annual New Year's rally.

On the other hand, the paunchy bears will side with the bulls, and playing on a rise with new monthly futures is too risky at the moment. To do this, you first need to pour enough money into the market to at least somehow patch up this leaky boat of crypto enthusiasm in the absence of an influx of new funds from outside buyers. Then you have to properly shake it and raise prices up to earn anything worthwhile by the end of the month. In general, it is hard, insecure, and it is best to keep hard-earned cash on the sidelines.

In summary, I dare to assume that in the medium term for the next month and a half, based on the current state of affairs, the market expects the continuation of this already quite long and boring stagnation with new downs and attempts to knock out the remaining players with "weak hands" (those, who bought at around $9,500 to $9,900 in the hope of closing at least a break even at $10,000, and those who were not allowed to do so by the strong and greedy bears in early May). Together with this, in order to make money on new futures bought in the $6,000 area "in short" at the beginning of this month, you need to push the price to $4,000 and even lower. But "dumping" below $5,000 to $4,000 from current values ​​is also quite difficult, since at these values ​​there may already be questions about the breakeven of mining, and the desire not to sell the little that remains purely out of principle may be overpowering (see chart).

The question as to who will win in this difficult and exhausting struggle is still without a clear answer. It is already possible to state the fact that throughout the first half of the year, the market was falling and, based on the annual pattern of price movements for a growing market, the second half may turn out to be another period of growth. If not to new heights, then at least to the existing upper values ​​of $17,000 to $20,000. Another thing is that the market can show these figures only by the very end of the year, in those next couple of shock months of the November and New Year rally. Until this moment, nothing prevents it from continuing to stagnate for a long time, allowing bears to continue pushing out weak players from the game and finally making slow-but-sure steps towards long-term growth after they leave the scorched earth. It is unknown when this might happen. For now, to the regret of the bulls and the bearish enjoyment of others, the current market does not provide sure prerequisites for growth.

Summing up, I still do not want to end on a minor note. We will pour a drop of bright paint into this bleak, gray picture. If the arrival of large speculative futures money on the market and the subsequent squeezing of all the "novices and hamsters" from it does not kill it, then, as the old saying goes, it will make it much stronger. And, hopefully, much smarter.