$
DigiBit Theme
Coinmarketcap
November 3, 2023
0 comments
14 Views


Open interest in Bitcoin (BTC) futures contracts 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 execution for the remaining calendar months, as buyers (longs) and sellers (shorts) are continually matched.

Bullish Momentum in CME Bitcoin Futures, but BTC Options Markets Cautious

The number of active major holders rose to a record high of 122 during the week of October 31, indicating growing institutional interest in Bitcoin. Notably, the Bitcoin CME futures premium reached its highest level in more than two years.

In neutral markets, the annual premium usually falls within the 5% to 10% range. However, the recent 15% premium for CME Bitcoin futures stands out, indicating strong demand for long positions. This also raises concerns as some may rely on the approval of exchange-traded futures (ETF) contracts for Bitcoin.

In contrast to the bullish trend in CME futures, evidence from Bitcoin options markets reveals growing demand for protective put options. For example, the open interest ratio on the Deribit exchange reached its highest level in more than six months.

Call put ratio for Deribit Bitcoin options. Source: Laevitas.ch

The current 1.0 level indicates a balanced open interest between put (buy) and put (sell) options. However, this indicator requires further analysis, as investors could have sold a call option, gaining positive exposure to Bitcoin above a specified price.

Regardless of demand in the financial derivatives market, the price of Bitcoin ultimately depends on spot exchange flows. For example, a rejection at $36,000 on November 2 triggered a 5% correction, taking the price down to $34,130. Interestingly, the Bitfinex exchange saw daily net inflows of BTC worth $300 million during this move.

As analyst James Stratten explained, whale deposits coincided with Bitcoin’s momentum fading, suggesting a possible connection between these movements. However, the pullback did not break the support level of $34,000, indicating the presence of real buyers at this level.

Bitcoin’s latest correction occurred while Russell 2000 futures, which measure mid-cap companies in the United States, rose 2.5% and reached a two-week high. This suggests that Bitcoin’s movement was not related to the US Federal Reserve’s decision to keep interest rates at 5.25%.

In addition, the price of gold remained stable at around $1,985 from November 1 to 3, indicating that the world’s largest store of value was not affected by the monetary policy announcement. The question remains: How much selling pressure can Bitcoin sellers still bear at $36,000?

Low availability of Bitcoin on exchanges can be tricky

As evidenced by the $300 million daily net inflow into Bitfinex, simply assessing current deposits on exchanges does not provide a clear picture of the availability of short-term selling. The decrease in the number of coins deposited may reflect a decrease in investor confidence in exchanges.

Aside from legal challenges against Coinbase and Binance exchanges by the US Securities and Exchange Commission over unlicensed brokerage operations, the FTX-Alameda Research debacle has raised more concerns among investors. Recently, US Senator Cynthia Lummis called on the Department of Justice to take “swift action” against Binance and Tether for their involvement in facilitating funds for terrorist organizations.

Related: The SEC is seeking summary judgment in the case of Do Kwon and Terraform Labs

Finally, the cryptocurrency market was affected by increasing returns from traditional fixed income operations, while returns from previously profitable cryptocurrencies disappeared after the collapse of Luna-TerraUSD in May 2022. This movement had lasting effects on the lending sector, leading to the collapse. For several brokers, including BlockFi, Voyager, and Celsius.

Right now, there is undeniably growing institutional demand for Bitcoin derivatives, according to futures data from the Chicago Mercantile Exchange. However, this may not be directly related to lower immediate availability, making the $36K-$40K bid difficult to predict – a level that has not been tested since April 2022.