Bitcoin has seen steady gains in price since the halving took place on May 11. The number of institutional investors trading in the CME crypto options market is a sign of continued interest in this asset class.
At press time, bitcoin's price has risen 12% since the reward for bitcoin miners was cut in half.
Over the past 24 hours, bitcoin (BTC) was trading up 6% at $9,689. The world’s first cryptocurrency is chugging higher, with technical indicators including the 10-day and 50-day moving averages above bullish levels since May 13.
Mark Warner, head of trading for crypto brokerage BCB group, told CoinDesk the price gain is due to continual interest in bitcoin as an asset class, and that the uncertain future faced by miners will take time to shake out.
“Broadly speaking, we expect demand for bitcoin to continue growing incrementally and it will take some time for the supply shock to work its way through the market and be reflected in price,” he said.
Bitcoin options open interest on CME, or the total number of outstanding contracts, have spiked since May 5, a sign of institutional interest. On Thursday, options open interest reached a high of $105 million, a huge jump considering average daily interest has been a paltry $13 million since Jan. 13 when first launched on CME.
Trading on the CME is generally done by well-capitalized investors with experience trading derivatives. The rise in open interest is likely coming from that subset of the market, said Vishal Shah, an options trader and founder of derivatives exchange Alpha5. “Whoever is behind these purchases is clearly a sophisticated trader,” he said.
The bitcoin activity uptick on the CME is from traders making bullish bets, says Shah. “The interest is in higher strikes, like May at $10,500 is a popular one,” he said. “There's a fair chance these are buyers of calls. Interestingly, $10,500 is a key level on the BTC chart, and a move through there is expected to bring some fireworks. It's no surprise then that the focus is on those strikes.”
A call gives the owner the right, but not the obligation, to buy a specified amount of an underlying asset at a specified price within a specified time.
Prior to the halving, bitcoin briefly broke through the $10,000 barrier. Shah isn’t the only trader predicting another run to that level and perhaps beyond. An uncertain economic outlook is one reason why Henrik Kugelberg, a Sweden-based over-the-counter trader, thinks that will happen.
“Bitcoin, in my opinion, is undervalued and the [coronavirus] pandemic is very young still,” Kugelberg told CoinDesk. “The upwards line will continue for a good two months, but the ride will be bumpy.”
Digital assets on CoinDesk’s big board are mostly in the green on Thursday. Ether (ETH), the second-largest cryptocurrency by market capitalization, gained 3.2% in 24 hours as of 20:00 UTC (4:00 p.m. ET).
Cryptocurrency gainers include iota (IOTA) climbing 6.2%, dogecoin (DOGE) being a good boy and in the green by 3.2% and nem (XEM), also up 3.2%. Losers in 24-hour trading include lisk (LSK), losing 2.5%, cardano (ADA) in the red 1.2%. and stellar (XLM) losing 1%. All price changes were as of 20:00 UTC (4:00 p.m. ET) Thursday.
In commodities, oil was trading up Thursday by 7% while gold was relatively flat, climbing less than a percent.
In the United States, the S&P 500 index of company stocks was up 1% Thursday. Stocks have traded rather choppily in the past month, yet the American equity benchmark has eked out a 1.8% gain during that time.
Toby Wu, senior analyst for multi-asset brokerage eToro, sees some positives for U.S. stocks in the near term. "There may be a ray of light as the U.S. plans to push out a new stimulus plan worth $3 trillion. If the plan is passed on Friday, we can expect this to bring some much-needed positivity to the U.S. market,” Wu wrote in a report Thursday.
U.S. Treasury bonds all slipped Thursday. Yields, which move in the opposite direction as price, were down most on the two-year bond, falling 10%.
In Europe, the FTSE Eurotop 100 index of the largest publicly traded companies closed trading in the red 2%. For Asia, the Nikkei 225 of Japan’s largest companies closed the trading day in Tokyo down 1.7%, weighed upon by poor performers in engineering, chemicals and electronics.
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