bitcoin futures open interest on the Chicago Mercantile Exchange (CME) hit an all-time high of $3.65 billion on November 1. This metric considers the value of each contract in play over the remaining calendar months, where buyers (longs) and sellers (shorts) continually combine.
Bullish momentum in CME bitcoin futures, but btc options markets cautious
The number of large active holders rose to a record 122 during the week of October 31, indicating growing institutional interest in bitcoin (btc). Notably, the CME bitcoin futures premium hit its highest level in over two years.
In neutral markets, the annualized premium is typically within the 5% to 10% range. However, the latest 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 a spot bitcoin exchange-traded fund.
Contrary to the bullish CME futures sentiment, evidence from bitcoin options markets reveals growing demand for protective puts. For example, the call options open interest index on the Deribit exchange reached its highest levels in more than six months.
The current level of 1.0 means a balanced open interest between call and put options. However, this indicator requires further analysis as investors could have sold the call option, 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 of $36,000 on November 2 caused 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.
The fourth largest entry bitcoin?src=hash&ref_src=twsrc%5Etfw”>#bitcoin to @bitfinex yesterday, it was approximately 300 million dollars; As soon as the influx began, bitcoin?src=hash&ref_src=twsrc%5Etfw”>#bitcoin began to have a downward trend.
Extremely bullish, significant selling pressure and bitcoin?src=hash&ref_src=twsrc%5Etfw”>#bitcoin is still above $34,000https://t.co/xVpZcXGAZW pic.twitter.com/I72N686HfH
—James V. Straten (@jimmyvs24) November 3, 2023
As highlighted by analyst James Straten, the whale deposit coincided with the fading of bitcoin momentum, suggesting a possible connection between these movements. However, the drop did not surpass the $34,000 support, indicating that there are real buyers at that level.
bitcoin‘s latest correction came as futures for the Russell 2000 index, which measures mid-cap companies in the United States, gained 2.5% and hit a two-week high. This suggests that bitcoin‘s move was unrelated to the US Federal Reserve’s decision to keep interest rates at 5.25%.
Furthermore, the price of gold remained stable at around $1,985 between November 1 and 3, showing that the world’s largest store of value was not affected by the monetary policy announcement. The question remains: how much selling pressure do bitcoin sellers still have at $36,000?
Reduced bitcoin Availability on Exchanges May Be Misleading
As evidenced by the daily net inflow of $300 million into Bitfinex, simply evaluating current deposits on exchanges does not provide a clear picture of the availability of short-term sales. A lower number of coins deposited may reflect lower investor confidence in the exchanges.
In addition to legal challenges against exchanges Coinbase and Binance by the US Securities and Exchange Commission for 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 alleged involvement in facilitating funds for terrorist organizations.
Related: SEC Seeks Summary Judgment in Do Kwon and Terraform Labs Case
Finally, the cryptocurrency market has been hit by rising yields from traditional fiat fixed income trading, while the once lucrative yields from cryptocurrencies disappeared following the collapse of Luna-TerraUSD in May 2022. This The move has had lasting effects on the credit sector, leading to the collapse of several brokers, including BlockFi, Voyager, and Celsius.
Right now, according to CME futures data, there is growing institutional demand for bitcoin derivatives. However, this may not be directly related to lower spot availability, making it difficult to predict supply between $36,000 and $40,000, an untested level since April 2022.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
