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Bainance CEO tweets about severe market fluctuations; Does he know something we do not?


Changpeng Zhao, CEO of Bainance Exchange, tweeted last week that he expects “severe” fluctuations in the coming months. The tweet has led many to question whether he has information that others are unaware of.

According to the Coin Telegraph, Zhao tweeted:

Expect a lot of fluctuations in the market in the next few months.

This is not the first time Zhao has written about market fluctuations. He tweeted a few months ago that fluctuations are not limited to the digital currency market. However, many experts argue that in markets like the S & P500, 70% annual fluctuations, like what we see in the digital currency market, seem unlikely. Of course, they have crossed the Tesla stock out of the equation.

Bainance CEO tweets about severe market fluctuations;  Does he know something we do not?

What is oscillation?

Realized fluctuations are a measure by which daily price changes are measured; High volatility indicates that prices are experiencing wide-ranging changes over time, both downward and upward.

This measure may seem a bit illogical, but periods in which fluctuations are low will generally see explosive movements. This is partly because realized fluctuations are indicators that give us information about the past. During times when the market has low price movements, traders tend to overuse leverage, and this can lead to large amounts of capital being liquidated in sharp price changes.

Bainance CEO tweets about severe market fluctuations;  Does he know something we do not?

The chart above shows the 50-day fluctuations over the past two years, averaging 74 percent. Historically, this index has accelerated when it reached above 80%, but this cannot be confirmed with certainty. The data for February and April 2017 are examples of this violation.

Criteria for market fluctuations have nothing to do with falling or rising; Because they calculate daily price changes. It should not be forgotten that, by itself, low volatility does not mean a definite price dump in the short term.

Does the CEO of Bainance know something we do not?

Given that Changpeng Zhao, as the CEO of the world’s largest exchange, has a lot in common, it can always be argued that he may have information that we are unaware of. Now, if we say that he is sure that something will happen in the future, it is unlikely that we will not know whether it is positive or negative. However, if someone says that “I expect severe fluctuations in the next few months”, it does not mean that they know the direction of these fluctuations with certainty.

Let us assume that this hypothesis is correct and that the annual market fluctuations reach 100%; In this case, traders use an option contract strategy to take advantage of price movements in any direction. This strategy is called Short Iron Butterfly shorts. It should not be forgotten that this strategy is not effective in the absence of sharp fluctuations in the market and sometimes causes severe losses to the trader.

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