CRYPTO

Open interest in CME Bitcoin futures hits 8-month high, greater than when BTC was at $65K


The open interest rate (OI) of Bitcoin (BTC) futures trading on the Chicago Mercantile Exchange (CME) soared towards a new record on Thursday as BTC reclaimed a five-month high of $58,550 on BitStamp.

The total number of derivative contracts outstanding on CME Group’s Bitcoin Futures market is $3.22 billion, according to data provided by ByBt.com, just $40 million less than the record high set in February 2021. However, the OI came in higher than it was Bitcoin peaked in mid-April.

In detail, CME’s Bitcoin Futures OI price reached $3.02 billion on April 14, the day BTC reached nearly $65,000. But on Thursday, OI was more than 6% above the reading from mid-April, even as BTC price fluctuated within the $57,000-$58,550 price range.

Open interest on CME Bitcoin futures. Source: ByBt.com

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

Meanwhile, in the case of Bitcoin, the increased open interest in the futures market appears to indicate the desire of accredited investors to increase exposure to BTC.

The commercial sector increases exposure to Bitcoin futures

The latest OI readings indicate that more institutional capital is entering the Bitcoin market. As a result, investors were more confident in opening new positions in the $50,000 to $58,000 price range, with CME volumes trending higher in the past seven days.

Bitcoin futures – volume and open interest. Source: CME

Analysts see a consolidated rise across OI, volume and price as signs of fresh buying in the futures market. This also puts the underlying asset in a better position to continue its uptrend. So it looks like Bitcoin is going through a similar uptrend.

The primary evidence for bitcoin’s bullishness comes from the CFTC’s October 5 record. He notes that the commercial sector – which includes corporate hedgers – has accelerated their purchases of bitcoin futures; They now have a net position of over 10,000 BTC.

CME BTC futures exposure changes. Source: CFTC, Forbes

However, at the same time, hedge funds and retail investors appeared exposed in the bitcoin futures market. However, this may be their tactic to offset long positions elsewhere, such as the spot market.

This is primarily due to the higher annual premium available on CME futures prices on the spot markets. In recent days, the CME Bitcoin futures price has been regularly trading 15% above the spot BTC price, compared to an average of 7.7% in the first nine months of 2021.

Plus, bitcoin futures versus spot prices. Source: Skew

The Macro Basics Behind Bitcoin’s Return

The recent bout of buying in the Bitcoin spot market also emerged in the wake of data from US regulators.

For example, Gary Gensler, Chairman of the Securities and Exchange Commission (SEC), and Jerome Powell, Chairman of the Federal Reserve, have discouraged a ban on Bitcoin. Meanwhile, the growing prospect of SEC approval of a Bitcoin ETF has also fueled the “rumor buying” story.

Related Topics: Bitcoin Analyst “Highly Doubt” of Return to $50K – Will Weekly Close Lead to Correction?

Investors also sought exposure in the bitcoin market as consumer prices continued to rise in the US According to the Department of Labor, the Consumer Price Index (CPI) rose to 5.4% on an annual basis in September for the first time in thirteen years.

JP Morgan Chase noted in his latest report that rising inflation has led institutional investors to look for bitcoin, with some even seeing the cryptocurrency as a better haven asset than gold. In another report published in January 2021, the American banking giant predicted that the bitcoin price would reach $140,000 in the long term.

Scrolling out of gold as an ‘alt’ currency means a big rally for Bitcoin in the long run.

“Convergence of volatility between bitcoin and gold is unlikely to happen quickly and is in our mind a multi-year process. This means that the theoretical bitcoin price above $146,000 should be considered a long-term target, and therefore an unsustainable price target for this year.”

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