Bitcoin Futures Open Interest Hits All-Time High at CME
The open interest for Bitcoin futures at the Chicago Mercantile Exchange (CME) reached a record high of $3.65 billion on November 1. This metric considers the total value of all contracts for the remaining calendar months, matching buyers and sellers. This indicates strong bullish momentum in the market.
Bullish Momentum in CME Bitcoin Futures
During the week of October 31, there was a significant increase in the number of active large holders, reaching a record high of 122. This signals growing institutional interest in Bitcoin. The premium for CME Bitcoin futures also reached its highest level in over two years.
However, the 15% premium stands out and raises concerns as it suggests a strong demand for long positions, potentially relying on the approval of a spot Bitcoin exchange-traded fund.
Cautious BTC Options Markets
Contradicting the bullish sentiment in CME futures, evidence from Bitcoin options markets shows a growing demand for protective put options. The put-to-call open interest ratio at Deribit exchange is at its highest levels in over six months.
The current 1.0 level indicates balanced open interest between call and put options. However, further analysis is needed as investors may have sold call options to gain positive exposure to Bitcoin above a specific price.
Bitcoin Price Relies on Spot Exchange Flows
Despite the demand in derivatives markets, the price of Bitcoin ultimately depends on spot exchange flows. For example, when Bitcoin was rejected at $36,000 on November 2, it experienced a 5% correction to $34,130. During this movement, Bitfinex saw daily net BTC inflows of $300 million.
Analyst James Straten suggests a potential connection between the whale deposit and the downturn in Bitcoin’s momentum. However, the fact that the price did not breach the $34,000 support indicates real buyers at that level.
Bitcoin Movement Unrelated to U.S. Federal Reserve Decision
Bitcoin’s recent correction occurred independently of the U.S. Federal Reserve’s decision to maintain interest rates at 5.25%. While the Russell 2000 Index futures saw gains, Bitcoin’s movement was unaffected by this announcement.
Gold prices also remained stable during this period, indicating that Bitcoin’s price was not influenced by the monetary policy announcement.
Reduced Availability on Exchanges Can Be Deceiving
Assessing current deposits at exchanges does not provide a clear picture of short-term sale availability. A lower number of deposited coins may reflect lower investor confidence in exchanges rather than a decrease in supply.
Legal challenges against Coinbase and Binance, as well as concerns about Binance and Tether’s alleged involvement in facilitating funds for terrorist organizations, have impacted investor confidence in exchanges.
Growing Institutional Demand for Bitcoin Derivatives
There is undeniable growing institutional demand for Bitcoin derivatives based on CME futures data. However, it is challenging to predict the supply between $36,000 and $40,000, as it has not been tested since April 2022.
Hot Take: The Impact of Institutional Demand on Bitcoin
The increasing open interest in Bitcoin futures at CME and growing institutional interest suggest a positive sentiment in the market. However, caution is needed as options markets show a demand for protective put options. The price of Bitcoin ultimately relies on spot exchange flows, and recent movements have shown the influence of whale deposits. While reduced availability on exchanges may indicate lower investor confidence, it is challenging to predict the supply between $36,000 and $40,000. The cryptocurrency market has also been impacted by legal challenges and the collapse of lending intermediaries. Overall, the market remains dynamic and influenced by various factors.
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