BTC Futures Show Heavy Interest in $40K

The Chicago Mercantile Exchange (CME) Bitcoin futures recently surpassed Binance’s BTC futures in size, signaling strong institutional interest in Bitcoin, particularly with an eye on surpassing the $40,000 mark in the near term.

As of November 10, CME’s Bitcoin futures open interest reached $4.35 billion, the highest since November 2021 when Bitcoin peaked at $69,000. This surge in interest is possibly linked to speculation around the approval of a spot Bitcoin ETF, with a notable 125% increase in CME’s BTC futures open interest from $1.93 billion in mid-October.

Despite this growth, it’s essential to recognize that there is no direct link between this increase and market makers’ or issuers’ activities. Institutional investors have several alternatives to avoid the high costs associated with futures contracts, including CME Bitcoin options, which require less capital, and regulated ETFs and ETNs available in other regions.

The significant growth in CME Bitcoin futures suggests institutional investors are indeed focusing on cryptocurrency, even though it may seem unlikely that major asset managers would engage in high-risk derivatives trading based on a decision by the U.S. Securities and Exchange Commission not expected until mid-January.

Another key development is the spike in the annualized premium (basis rate) of CME Bitcoin futures. Typically, a 5% to 10% basis rate is expected in neutral markets. However, on November 28, this premium shot up from 15% to 34%, before stabilizing at 23% by the end of the day, indicating a strong bullish sentiment among buyers.

This optimism is further evidenced by the movement in Bitcoin’s price, which rose from $37,100 to $38,200 in just eight hours on November 28. However, it’s challenging to attribute this price surge solely to the spot market or futures contracts due to rapid arbitrage between the two.

For more accurate insights into institutional interest, the BTC option markets data is more telling. The 30-day BTC options 25% delta skew has consistently been below the -7% threshold, reaching near -10% on November 28, suggesting bullish sentiment among institutional investors.

If whales and market makers were nearly certain of an SEC approval for a spot Bitcoin ETF, as some analysts believe, the BTC options delta skew would likely be much lower. Despite this, with Bitcoin’s price hovering around $38,000, it appears that bulls will keep challenging resistance levels, buoyed by the ongoing hope for a spot ETF approval.