Tuesday, July 5

CME Bitcoin futures open interest hits an 8-month high, higher than when BTC price was at $ 65K


Open interest (OI) to trade Bitcoin (BTC) futures on the Chicago Mercantile Exchange (CME) slowly moved towards a new record on October 14 when BTC recovered its five-month high of $ 58,550 on BitStamp.

The total number of outstanding derivative contracts on the CME Group’s Bitcoin futures market reached $ 3.22 billion, just $ 40 million below its all-time high in February 2021, according to data provided by ByBt.com. Nonetheless, the OI turned out to be higher than at the peak of Bitcoin’s price in mid-April.

In detail, the Bitcoin Futures OI on CME was $ 3.02 billion on April 14, the day the price of BTC almost hit $ 65,000. But on October 14, the OI was more than 6% higher than the mid-April readings, even as the price of BTC faltered within the $ 57,000 to $ 58,550 price range.

CME Bitcoin Futures Open Interest. Source: ByBt.com

Traders often use OI as an indicator to confirm trends in both derivatives and spot markets. For example, an increasing number of pending derivative contracts are interpreted as new money entering the market, regardless of bias.

Meanwhile, in the case of Bitcoin, a growing open interest in the futures market seems indicative that accredited investors want to increase exposure to BTC.

Trading Sector Increases Exposure to Bitcoin Futures

The latest OI readings suggest that more institutional capital is pouring into the Bitcoin market. As a result, investors have been more confident opening new positions in the $ 50,000 to $ 58,000 price range, with CME volumes trending up over the past seven days.

Bitcoin futures: volume and open interest. Source: CME

Analysts watch a uniform increase in OI, volume and price as signs of new purchases in the futures market. That also puts the underlying asset in a better position to continue its uptrend. So, it appears that Bitcoin is experiencing a similar uptrend.

Main test of a bullish Bitcoin comes from of the Commodity Futures Trading Commission registry published on October 5. He notes that the trading sector, which is made up of corporate hedgers, has accelerated its purchases of Bitcoin futures. They now have a net position of over 10,000 BTC.

Changes in CME BTC futures exposure. Source: CFTC, Forbes

Yet at the same time, hedge funds and retail investors have gone net short on the Bitcoin futures market. However, that could be your tactic to offset long positions elsewhere, such as the spot market.

That’s mainly due to a higher annualized premium available in CME Bitcoin futures prices over the spot markets. In recent days, the price of CME Bitcoin futures has been regularly trading 15% above the spot price of BTC, compared to around 7.7% on average in the first nine months of 2021.

Bitcoin Futures Premium vs. Spot Prices. Source: Skew

Macroeconomic fundamentals behind Bitcoin’s resurgence

The latest episode of buying in the Bitcoin spot market also appeared in the wake of statements from US regulators.

For example, Gary Gensler, chairman of the Securities and Exchange Commission (SEC), and Jerome Powell, chairman of the Federal Reserve, advised against banning Bitcoin. Meanwhile, the growing prospect of a Bitcoin ETF approval by the SEC has also fueled the “buy the rumor” narrative.

Related: Bitcoin Analyst ‘Highly Doubts’ Returning to $ 50K – Will Weekly Close Cause Correction?

Investors also sought exposure to the Bitcoin market as consumer prices continued to rise in the U.S. According to the Department of Labor, the Consumer Price Index (CPI) rose 5.4% year-over-year in September by first time in thirteen years.

JP Morgan Chase noted in its recent report that higher inflation prompted institutional investors to seek exposure to Bitcoin, with some even viewing the cryptocurrency as a better safe haven asset than gold. In another report published in January 2021, the United States banking giant had anticipated that the price of BTC would reach $ 140,000 in the long term.

“A displacement of gold as an ‘alternative’ currency implies a great advantage for Bitcoin in the long term,” he noted.

“A convergence in volatilities between Bitcoin and gold is unlikely to occur rapidly and, in our mind, it is a multi-year process. This implies that Bitcoin’s previous theoretical target price of $ 146,000 should be viewed as a long target. deadline and therefore an unsustainable price target for this year. “

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you should do your own research when making a decision.