Cryptocurrencies

Institutions Take Record Bullish Bets in Bitcoin Futures, Shrugging Off Exchange Missteps

CME Trading Floor (Joseph Sohm/Shutterstock)

Institutions recently raised their bullish bets in bitcoin (BTC) futures listed on the Chicago Mercantile Exchange (CME) to the record level set last month amid signs of market maturity.

  • In the week ended Oct. 13, institutional investors increased long positions by over 9%, taking the tally of bullish bets to the record high of 3,500 contracts reached in mid-September.
  • The numbers were revealed by the Commitment of Traders (COT) report published by the U.S. Commodity Futures Trading Commission (CFTC) on Friday.
  • The cryptocurrency’s price reached multi-week highs above $11,700 during the seven days to Oct. 1, confirming a breakout on technical charts.
  • BTC’s recent resilience to several exchange-related issues may have given institutions the confidence to increase their bullish bets.
  • The cryptocurrency remained largely bid above $10,000 earlier this month despite news of the KuCoin exchange hack and U.S. regulators bringing criminal and civil charges against BitMEX.
  • Similarly, buyers defended support at $11,200 on Friday after prominent crypto exchange OKEx suspended withdrawals.
  • “Had these events happened last year, the [bearish] impact on bitcoin’s price would have been much greater,” Sui Chung, CEO of CF Benchmarks, said in a statement to CoinDesk.
  • The derivatives market is now less dependent on exchanges like BitMEX and OKEx than a year ago.
  • In September 2019, the two exchanges accounted for over 70% of the global BTC derivatives’ open interest. That number has now dropped to 40%.
  • As such, the cryptocurrency is less sensitive to exchange-related issues. That’s a testament to the growing maturity of the cryptocurrency space, according to Chung.

Are speculators bearish?

  • Speculators or leveraged funds – hedge funds and various types of money managers that, in effect, borrow money to trade – increased their short positions by 4% to 14,100 – the record low seen in August.
  • That does not necessarily imply bearish implications for price.
  • According to Patrick Heusser, a senior cryptocurrency trader at Zurich-based Crypto Broker AG, cash and carry trading may have pushed bearish bets to record highs.
  • “Cash and carry” is an arbitrage strategy that involves buying the asset on the spot market and taking a sell position in the futures market when the latter is trading at a significant premium to the spot price.
  • Futures prices converge with spot prices on the day of the expiry, yielding a risk-free return to a carry trader.

Also read: Bitcoin Price Dips 3% on OKEx News, Analysts Aren’t Too Worried

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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