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

Institutions hold record bullish beets in CME Bitcoin futures as the cryptocurrency shows resilience to negative news.

Oct 17, 2020 at 12:09 p.m. UTC
Updated Sep 14, 2021 at 10:11 a.m. UTC

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.
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CME Bitcoin Futures

  • 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.

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