CME Futures Participants Aiding Bitcoin (BTC) Price Action

Institutional speculators and high net worth individuals on CME have been active in the Bitcoin futures market since the start of the year. Nearing $350 million of open interest and $1 billion of volume, CME has become an important aspect of the Bitcoin market, February 20, 2020.

Outlook from Bitcoin Derivatives

Bitcoin futures across trading avenues have open interest worth $5 billion. As per Skew data, leading retail platforms for Bitcoin derivatives are OKEx and BitMEX.

Retail inclusion in crypto markets is nothing new, as unlike traditional financial markets, retail money accounts for the vast majority of crypto derivatives and token investments. Institutional speculators, however, have been scarce in the markets, so increased activity from them is noteworthy.

Analysts and enthusiasts in the space have long-awaited the institutionalization of crypto markets, with effective price discovery through physically settled futures and options. Bakkt offers such a product, but traction has been limited for a number of reasons.

CME has managed to fortify themselves as the leading trading avenue for institutions with consistent volumes. Over the last few weeks, this volume has turned up significantly, nearing $1 billion.

Are Institutions Bullish or Bearish?

Without granular data, it is difficult to ascertain which direction of trade – long or short – is seeing more traction. Analysts in Bitcoin speculate that institutions have been waiting for the right opportunity to short, and sustained volume in CME is a result of them building up their positions.

However, volumes have been strong as the price of Bitcoin went up nearly 50 percent from the start of the year until the local top at $10,500. As a result, speculator sentiment is unknown, but we do know that they are taking active positions in the market.

BTC/USD longs on Bitfinex hit their highest figure in history, including the 2017 bull run. This is a bearish indicator, as it means a majority of people are staking their claim on BTC continuing the uptrend. In this case, a healthy pullback is probably on the cards for BTC, and the narrative that high net worth speculators are building short positions makes sense.

Either way, sustained activity from these entities is favorable for the broader market – even if their short term target is bearish.