Chicago Mercantile Exchange Bitcoin Futures Open Interest

Open Interest (OI) for Bitcoin futures on the Chicago Mercantile Exchange (CME) hit a new record high yesterday (October 14) when BTC hit a five-month high of $ 58,550 a year.

According to ByBt.com, the total number of derivative contracts outstanding in the CME bitcoin futures market reached $ 3.22 billion, just $ 40 million off the record high of February 2021.

Open interest in CME Bitcoin futures hit $ 3.02 billion on April 14, the day the BTC price hit nearly $ 65,000. But yesterday it was at $ 3.22 billion, 6% higher than April, even though the BTC price hovered between $ 57,000 and $ 58,550.

Bitcoin Futures Open Interest on CME | Source: ByBt.com

Traders often use open interest as an indicator to confirm trends in both the derivatives and spot markets. For example, an increasing number of unsettled derivative contracts is interpreted as a new money entry into the market, regardless of the development.

In the case of Bitcoin, meanwhile, the growing open interest in the futures market seems to indicate that accredited investors are looking to increase their exposure to BTC.

The trading sector is increasing exposure to bitcoin futures

More and more capital from institutional investors is pouring into the Bitcoin market. Hence, it appears that they are more confident about opening new positions in the $ 50,000- $ 58,000 price range, with trading volume on the CME trending higher for the past seven days.

Bitcoin futures trading volume and open interest | Source: CME

Analysts suspect that the steady increase in open interest, trading volume and price as a sign of new purchases on the futures market has given Bitcoin the impetus to continue its upward trend.

Specific evidence of Bitcoin’s price spike comes from filings made by the United States Commodity Futures Trading Commission (CFTC). announced 5. It noted that the commercial sector – including hedging companies – has accelerated the buying of bitcoin futures contracts, which currently hold a net position of over 10,000 BTC.

BTC futures exposure on CME | Source: CFTC, Forbes

At the same time, hedge funds and retail investors have built net short positions in the Bitcoin futures market. However, their tactic might be to offset long positions elsewhere, such as the spot market.

This is mainly because the annual premium of the CME Bitcoin futures contract is higher than the spot price. For the past few days, the price of the CME Bitcoin futures contract has been trading consistently 15% higher than the spot price, while the average for the first nine months of 2021 is only around 7.7%.

The premium for Bitcoin futures is higher than the spot price | Source: Skew

The macro rationale behind the Bitcoin resurgence

The latest bull run on the Bitcoin spot market also comes according to statements from US regulators.

For example, Gary Gensler, chairman of the US Securities and Exchange Commission (SEC) and Jerome Powell, chairman of the US Federal Reserve (Fed) do not advocate a ban on Bitcoin. Meanwhile, the growing prospect of SEC approval of a Bitcoin ETF has also fueled the “buy the rumors” narrative.

Investors are also looking for exposure to the Bitcoin market as consumer prices continue to rise in the United States, with the Consumer Price Index (CPI) rising 5.4% year over year in October for the first time in thirteen years.

Anthony Pompliano (‘Pomp’), co-founder of Morgan Creek Digital and host of The Pomp Podcast, took to Twitter to reflect:

“Inflation was 5.4% in September, its highest level in 13 years. Bitcoin just passed the $ 58,000 mark, its highest price since May this year. Bitcoin continues to serve as the best anti-inflation vehicle in the world. “

JP Morgan Chase noted in its latest report that higher inflation has led institutional investors to seek exposure to Bitcoin, with some even viewing the cryptocurrency as safe capital – safer than gold. In another report released in January 2021, JP Morgan also forecast that BTC price would hit $ 140,000 in the long run.

“Gold’s dominance as an alternative currency implies that Bitcoin will be bullish over the long term.”

“The volatility convergence between Bitcoin and Gold is unlikely to happen anytime soon, and we believe it will be a multi-year process. This implies that $ 146,000 and more should theoretically be viewed as a long-term target for Bitcoin, and that is the inevitable price target for this year. ”

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