Spot Bitcoin ETF Approval Will Trigger 'Selling Pressure' on CME Futures Market: K33

Bitcoin futures' open interest on the Chicago Mercantile Exchange surged to an all-time high Tuesday as institutions piled into the asset, speculating on a spot bitcoin ETF approval.

AccessTimeIconJan 9, 2024 at 10:03 p.m. UTC
Updated Mar 8, 2024 at 7:34 p.m. UTC
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  • CME bitcoin futures open interest hit $6.2 billion Tuesday as institutions increasingly bet on a spot bitcoin ETF approval.
  • The trend may soon reverse as investors will quickly unwind positions if ETFs get approved, K33 Research predicted.

Bitcoin (BTC) futures open interest on the top U.S. marketplace hit a record-high on Tuesday as institutional players keep piling into the asset in anticipation of a spot bitcoin ETF approval, but the trend may end soon as SEC's greenlight will trigger selling pressure, K33 Research said in a note.

The open interest (OI) – active trading positions – for BTC futures contracts on the Chicago Mercantile Exchange (CME), the largest BTC futures trading venue and favored by sophisticated market participants, rose to $6.2 billion or 132,900 in BTC terms during the day, both fresh all-time highs, CoinGlass data shows.

The record-breaking happened as CME bitcoin OI almost doubled from 72,000 BTC in mid-October, with market participants increasingly betting on regulators allowing the first spot-based bitcoin ETFs that can hold bitcoin directly. Steady inflows into futures-based bitcoin ETFs such as ProShares' BITO, which holds BTC futures traded on CME, also contributed to the rise.

For full coverage of bitcoin ETFs, click here.

CME bitcoin futures open interest in BTC terms (K33 Research)
CME bitcoin futures open interest in BTC terms (K33 Research)

As a sign of bullish sentiment, CME front-month futures contracts traded at a hefty premium of 18.7% annualized to the spot price, according to TradingView data.

However, K33 Research forecasted in a Tuesday market report that this regime won't last, and both the open interest and premium will plummet if a spot-based bitcoin ETF gets approved in the U.S.

The report pointed out that some 43% of the CME bitcoin futures contracts belonged to futures-based ETFs. As investors will likely rotate funds to cheaper spot ETFs, futures funds need to close their positions, pushing open interest and the premium lower.

The other 57% of the contracts are held by active market participants, the report follows, whose exposure increased by 128% – to around 75,000 BTC from 33,000 – over the past three months. Holding these positions open is very expensive at the current premium, K33 noted, forecasting that some investors will seek to realize profits after the bitcoin ETF approval.

"All else equal, this structural rotation will lead to selling pressure," K33 analysts Anders Helseth and Vetle Lunde wrote. "CME’s all-time high regime could rapidly approach an end."

Edited by Aoyon Ashraf.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.

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