Bitcoin (BTC) Futures open interest on the Chicago Mercantile Exchange (CME) reached an all-time high of $3.65 billion on November 1. This metric takes into account the value of each contract in play for the remaining calendar months, where buyers (longs) and sellers (short buyers) are continually matched.
Bullish momentum on CME Bitcoin futures, but BTC options markets cautious
The number of large active holders reached a record 122 during the week of October 31, signaling growing institutional interest in Bitcoin. Notably, the CME Bitcoin futures premium has reached its highest level in over two years.
In neutral markets, the annualized premium is generally between 5 and 10%. However, the latest 15% premium for CME Bitcoin futures stands out, indicating strong demand for long positions. This also raises concerns, as some might rely on the approval of a spot Bitcoin exchange-traded futures (ETFs).
Contrary to the bullish sentiment in CME futures, evidence from Bitcoin options markets reveals growing demand for protective puts. For example, 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 balanced open interest between call (buy) and put (sell) options. However, this indicator requires further analysis, as investors could have sold the call option, thereby gaining positive exposure to Bitcoin above a specific price.
Regardless of demand in the derivatives market, the price of Bitcoin ultimately depends 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 saw daily net BTC inflows of $300 million during this move.
– James V. Straten (@jimmyvs24) November 3, 2023
As analyst James Straten pointed out, the whale filing coincided with the decline in Bitcoin’s momentum, suggesting a potential connection between these movements. However, the downturn did not break above the $34,000 support, indicating real buyers at this level.
Bitcoin’s latest correction came as futures on the Russell 2000 index, measuring mid-sized companies in the United States, gained 2.5% and hit a two-week high. This suggests that Bitcoin’s movement was not linked to the US Federal Reserve’s decision to keep interest rates at 5.25%.
Additionally, the price of gold remained stable around $1,985 between November 1 and 3, demonstrating 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 hold?
Reduced Bitcoin Availability on Exchanges May Be Deceptive
As demonstrated by the $300 million daily net inflow to Bitfinex, simply assessing current deposits on exchanges does not provide a clear picture of near-term sales availability. A lower number of coins deposited may reflect lower investor confidence in exchanges.
In addition to lawsuits against exchanges Coinbase and Binance by the US SEC for unlicensed brokerage operations, the FTX-Alameda Research debacle has sparked more concerns among investors. Recently, U.S. Senator Cynthia Lummis called on the Justice Department to take “swift action” against Binance and Tether for their involvement in facilitating the financing of terrorist organizations.
Finally, the cryptocurrency market was impacted by increasing yields from traditional fiat fixed income trading, while the once lucrative yields from cryptocurrencies disappeared after the crisis. Luna-TerraUSD collapse in May 2022. This movement has had lasting effects on the credit sector, leading to the collapse of several intermediaries, including BlockFi, Voyager and Celsius.
Currently, there is growing institutional demand for Bitcoin derivatives, according to CME futures data. However, this may not be directly related to lower spot availability, making it difficult to forecast supply between $36,000 and $40,000 – a level not tested since April 2022.
This article is intended for general information purposes and is not intended to be and should not be relied upon as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.