Open Interest (OI) for Bitcoin Futures (BTC) traded on the Chicago Mercantile Exchange (CME) approached a new high on Thursday as BTC recovered its five-month high of $ 58,550 on BitStamp.
The total number of derivative contracts outstanding in CME Group’s Bitcoin Futures market has reached $ 3.22 billion, according to data provided by ByBt.com, just $ 40 million below its record high in February 2021. Nevertheless, the OI turned out to be higher than it was. at the peak of the Bitcoin price in mid-April.
In detail, Bitcoin Futures OI on CME was $ 3.02 billion on April 14, when the price of BTC nearly hit $ 65,000. But on Thursday, the OI was more than 6% higher than the mid-April readings, even as the price of BTC hovered in the $ 57,000 to $ 58,550 price range.
Traders often use the OI as an indicator to confirm trends in derivatives and spot markets. For example, an increasing number of open derivative contracts are interpreted as new money entering the market regardless of the bias.
Meanwhile, in the case of Bitcoin, growing open interest in the futures market seems to indicate that accredited investors want to increase their exposure to BTC.
Commercial sector increases exposure to Bitcoin Futures
The latest OI readings suggest that more institutional capital is entering the Bitcoin market. As a result, investors appear more confident in opening new positions in the $ 50,000 to $ 58,000 price range as CME volumes have tended to increase over the past seven days.
Analysts see a consistent increase in OI, volume and prices as signs of further buying in the futures market. It also puts the underlying asset in a better position to continue its uptrend. So it looks like Bitcoin is experiencing a similar uptrend.
The main evidence of a bullish Bitcoin comes from the Commodity Futures Trading Commission file released on October 5. He notes that the commercial sector – which includes hedging companies – has stepped up its purchases of Bitcoin Futures; they now hold a net position of over 10,000 BTC.
At the same time, however, hedge funds and retail investors have gone net short in the Bitcoin futures market. Nonetheless, this could be their tactic to offset long positions elsewhere, such as in the spot market.
This is mainly due to a higher annualized premium available on CME Bitcoin Futures prices compared to the spot markets. In recent days, the CME Bitcoin futures price has traded steadily 15% above the BTC spot price, compared to around 7.7% on average in the first nine months of 2021.
The macro fundamentals behind the resurgence of Bitcoin
The latest episode of buying in the Bitcoin spot market has also emerged following statements 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 a Bitcoin ETF approval by the SEC has also fueled the “buy the rumor” narrative.
Related: Bitcoin Analyst ‘Strongly Doubts’ Return to $ 50,000 – Will Weekly Close Trigger a Correction?
Investors also sought exposure to the Bitcoin market as consumer prices continued to soar in the United States.
Inflation stood at 5.4% in September, a 13-year high.
Bitcoin just crossed over $ 58,000, which is the highest price since May of this year.
Bitcoin continues to be the best inflation hedge in the world.
– Pump (@APompliano) October 14, 2021
JP Morgan Chase noted in its recent report that higher inflation has prompted institutional investors to seek exposure to Bitcoin, with some even viewing cryptocurrency as a better safe haven asset than gold. In another report released in January 2021, the US banking giant predicted that the price of BTC would hit $ 140,000 in the long run.
“A foreclosure of gold as an ‘alternative’ currency means a big advantage for Bitcoin in the long run,” he noted.
“A convergence of volatilities between Bitcoin and gold is unlikely to occur quickly and is in our minds a multi-year process. This implies that the theoretical Bitcoin price target above $ 146,000 should be viewed as a target. long term, and therefore an unsustainable price target for this year. “
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