Open Interest (OI) for Bitcoin (BTC) futures trading on the Chicago Mercantile Exchange (CME) hit a new record high on Thursday as BTC recaptured a five-month high of $ 58,550 on BitStamp.
According to data from ByBt.com, the total number of derivatives contracts outstanding on the CME Group’s Bitcoin futures market reached $ 3.22 billion, just $ 40 million off the highs, with the record set in February 2021 on the Bitcoin -Price high in mid-April.
In particular, the Bitcoin Futures OI on CME was $ 3.02 billion on April 14, the day the BTC price hit nearly $ 65,000. But on Thursday open interest was 6% higher than mid-April levels, even though BTC price hovered in the $ 57,000 to $ 58,550 price range.
Traders often use OI as an indicator to confirm trends in both the derivatives and spot markets. For example, an increasing number of unsettled derivative contracts are interpreted as trend-independent new money.
In the case of Bitcoin, however, the growing open interest in the futures market seems to indicate that accredited investors are looking to increase their exposure to BTC.
The commercial sector is increasing exposure to bitcoin futures
The latest OI metrics show that more institutional capital is entering the Bitcoin market. As a result, investors seem more confident about taking new positions in the $ 50,000- $ 58,000 price range, with CME volumes trending higher over the past seven days.
Analysts see a uniform increase in open interest, volume and price as a sign of new purchases on the futures market. This also puts the underlying asset in a better position to resume its uptrend. So it looks like Bitcoin is going through a similar upward trend.
The main evidence of Bitcoin’s price spike comes from a filing by the Commodity Futures Trading Commission released on Oct. 5. It found that the trading sector – including hedging companies – had accelerated purchases of their Bitcoin futures; They currently hold a net position of over 10,000 BTC.
At the same time, however, hedge funds and retail investors have shown a deficit in the Bitcoin futures market. However, your tactic might be to cover long positions elsewhere, such as the spot market.
This is mainly due to the higher annual premiums available on CME Bitcoin futures prices compared to the spot market. For the past few days, the CME Bitcoin futures price has been trading consistently 15% above the spot price of BTC, compared to an average of around 7.7% in the first nine months of 2021.
The macro rationale behind the Bitcoin resurgence
The latest purchases on the Bitcoin spot market also come according to statements from US regulators.
For example, Gary Gensler, chairman of the Securities and Exchange Commission (SEC) and Jerome Powell, chairman of the Federal Reserve, don’t advocate a ban on bitcoin. Meanwhile, the growing prospect of an SEC-approved Bitcoin ETF has also fueled the “buy the rumors” narrative.
Related: Bitcoin Analyst “Very Skeptical” To Return To $ 50,000 – Will Weekly Close Make A Correction?
Investors are also looking for exposure to the Bitcoin market as US consumer prices continue to skyrocket 13 years from now.
Inflation in September was 5.4%, its highest level in 13 years.
Bitcoin has just topped $ 58,000, its highest price since May of this year.
Bitcoin continues to serve as the best inflation hedge in the world.
– Pomp (@APompliano) October 14, 2021
JP Morgan Chase noted in its latest report that higher inflation has led institutional investors to seek exposure to Bitcoin, with some even seeing the cryptocurrency as a port better than gold. In another report released in January 2021, the U.S. banking giant predicted that BTC price would hit $ 140,000 in the long run.
It states: “The strong concentration of gold as an alternative currency implies that Bitcoin will increase in value in the long term.”
“A convergence of volatility between Bitcoin and Gold is unlikely to happen anytime soon and we believe it will take several years. This implies that a theoretical Bitcoin price target of over $ 146,000 should be viewed as a long-term goal and therefore an unsustainable price target for this year. “