Open interest in Bitcoin (BTC) futures contracts on the largest US market reached a record high on Tuesday as institutional players continue to pile into the asset in anticipation of Bitcoin exchange-traded fund approval, but the trend could end soon as a green light from the SEC will spur pressures on… sale. K33 Research said in a note.
Open interest (OI) – active trading positions – for BTC futures on the Chicago Mercantile Exchange (CME), The largest place to trade BTC futures The value favored by sophisticated market participants rose to $6.2 billion or 132,900 bitcoins during the day, both all-time highs. Coinglass data Offers.
The record high occurred as CME’s Bitcoin OI nearly doubled from 72,000 BTC in mid-October, as market participants increasingly bet on regulators allowing the first spot-basis bitcoin ETFs that can hold bitcoin directly. Steady flows Futures-based bitcoin ETFs like ProShares’ BITO, which holds BTC futures traded on the CME, also contributed to the rally.
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As a sign of the bullish sentiment, CME front-month futures traded at a hefty 18.7% annual premium to the spot price, according to TradingView data.
However, K33 Research expected a release on Tuesday Market report This system will not last, and both open interest and premium will decline if a Bitcoin ETF is approved in the US.
The report noted that about 43% of Bitcoin futures contracts on the Chicago Mercantile Exchange belong to futures-based ETFs. Since investors are more likely to rotate money into cheaper spot ETFs, futures funds need to close their positions, pushing open interest and premiums down.
The report follows that the other 57% of contracts are held by active market participants, whose exposure has increased by 128% – to about 75,000 BTC from 33,000 – over the past three months. K33 noted that keeping these positions open is very expensive at the current premium, and predicted that some investors will seek profits following the Bitcoin ETF’s approval.
“All else being equal, this structural rotation will lead to selling pressure,” wrote Anders Helseth and Vetel Lund, analysts at K33. “The highest-ever CME regime could quickly be coming to an end.”