On November 1, the open interest of Bitcoin futures on the Chicago Mercantile Exchange (CME) hit an all-time high of $3.65 billion. This figure represents the total value of all contracts in play for the remaining calendar months, where buyers (longs) and sellers (shorts) are matched continuously.
Bullish sentiment in CME Bitcoin futures, but cautious approach in BTC options markets
The number of active large holders reached a record 122 during the week of October 31, indicating a growing institutional interest in Bitcoin. Additionally, the premium for Bitcoin CME futures reached its highest level in over two years.
In neutral markets, the annualized premium typically falls between 5% and 10%. However, the current premium of 15% for CME Bitcoin futures stands out, suggesting a strong demand for long positions. This also raises concerns, as some may be relying on the approval of a spot Bitcoin exchange-traded fund.
In contrast to the positive sentiment in CME futures, Bitcoin options markets reveal an increasing demand for protective put options. The put-to-call open interest ratio on the Deribit exchange has reached its highest levels in over six months.
The current level of 1.0 signifies a balanced open interest between call (buy) and put (sell) options. However, further analysis is needed as investors may have sold the call option to gain positive exposure to Bitcoin above a specific price.
Regardless of the derivative market’s demand, Bitcoin’s price ultimately relies on spot exchange flows. For example, the rejection at $36,000 on November 2 resulted in a 5% correction, bringing the price down to $34,130. Interestingly, the Bitfinex exchange experienced daily net BTC inflows of $300 million during this movement.
— James V. Straten (@jimmyvs24) November 3, 2023
As noted by analyst James Straten, the whale deposit coincided with the declining momentum of Bitcoin, suggesting a potential connection between the two movements. However, the downturn did not breach the $34,000 support level, indicating the presence of real buyers at that level.
Bitcoin’s recent correction occurred while the Russell 2000 Index futures, which measure mid-cap companies in the United States, rose by 2.5% and reached a two-week high. This suggests that Bitcoin’s movement was unrelated to the U.S. Federal Reserve’s decision to maintain interest rates at 5.25%.
In addition, the price of gold remained stable at around $1,985 between November 1 and November 3, indicating that the world’s largest store of value was unaffected by the monetary policy announcement. The question remains: how much selling pressure do Bitcoin sellers at $36,000 still possess?
Reduced Bitcoin availability on exchanges can be misleading
Merely assessing current deposits at exchanges does not provide a clear picture of the availability for short-term selling, as shown by the $300 million daily net inflow to Bitfinex. A lower number of deposited coins may be a reflection of diminished investor confidence in exchanges.
In addition to the legal challenges faced by Coinbase and Binance from the U.S. Securities and Exchange Commission for unlicensed brokerage operations, the FTX-Alameda Research incident has raised more concerns among investors. U.S. Senator Cynthia Lummis recently called on the Justice Department to take swift action against Binance and Tether for their alleged involvement in facilitating funds for terrorist organizations.
Lastly, the cryptocurrency market has experienced increased returns from traditional fiat fixed-income operations, while once lucrative cryptocurrency yields have disappeared following the Luna-TerraUSD collapse in May 2022. This movement has had long-lasting effects on the lending sector, leading to the collapse of several intermediaries, including BlockFi, Voyager, and Celsius.
Currently, there is unquestionably growing institutional demand for Bitcoin derivatives according to CME futures data. However, this may not be directly connected to lower spot availability, making it challenging to predict the supply between $36,000 and $40,000, a level that has not been tested since April 2022.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
The open interest of Bitcoin futures on the CME reached a record high of $3.65 billion on November 1. This indicates the increasing demand for long positions and growing institutional interest in Bitcoin. However, Bitcoin’s options market shows a rising demand for protective put options, signaling caution. Bitcoin’s recent correction was not influenced by the U.S. Federal Reserve’s decision to maintain interest rates, and the stability of gold prices suggests that the world’s largest store of value was not impacted. Despite reduced availability of Bitcoins on exchanges, there is uncertainty about the selling pressure at the $36,000 level. The collapse of cryptocurrency yields and legal challenges faced by exchanges have affected investor confidence. While there is growing institutional demand for Bitcoin derivatives, the relationship between this demand and spot availability remains unclear.
### What is the open interest in Bitcoin futures on the CME?
The open interest represents the total value of all active contracts for Bitcoin futures on the Chicago Mercantile Exchange. It reached a record high of $3.65 billion on November 1.
### What does the increasing demand for protective put options indicate?
The rising demand for protective put options in Bitcoin’s options market suggests caution among investors. This indicates a desire to protect against potential downside risk or market volatility.
### Was Bitcoin’s recent correction related to the U.S. Federal Reserve’s decision?
No, Bitcoin’s recent correction was unrelated to the U.S. Federal Reserve’s decision to maintain interest rates. The correction occurred while the Russell 2000 Index futures, which measure mid-cap companies in the United States, rose to a two-week high, suggesting different factors at play.
### How has the availability of Bitcoins on exchanges been affected?
The availability of Bitcoins on exchanges may not accurately reflect short-term sale availability. Lower numbers of deposited coins could be a result of decreased investor confidence in exchanges due to legal challenges and other concerns.
### What effects have the collapse of cryptocurrency yields and legal challenges had?
The collapse of cryptocurrency yields following the Luna-TerraUSD collapse has had lasting effects on the lending sector. It has led to the collapse of several intermediaries, including BlockFi, Voyager, and Celsius. Legal challenges against exchanges by regulatory bodies have also impacted investor confidence.