With the price of Bitcoin (BTC) reaching 71,000 dollars, the futures market has recorded a peak in open interest. In this article, we look at the main factors driving this growth in BTC derivative contracts.
Record of open interest on Bitcoin (BTC) futures: the role of ETFs and CME contracts in influencing the price
In recent days, Bitcoin has surpassed the threshold of 71,000 dollars, a level not seen for months, while the futures market has recorded a record open interest (OI), indicating a strong inflow of capital.
L’open interest represents the total number of open contracts in the futures market, which remain active without yet being settled.
This data provides valuable information on the confidence and interest of traders.
This is because a high open interest, especially in conjunction with a price increase, suggests that new capital is entering the market. Thus reinforcing the bull trend of Bitcoin.
This unprecedented growth in Bitcoin’s open interest can be attributed primarily to three factors.
That is, the increase in futures contracts on the Chicago Mercantile Exchange (CME), the rise in funding rates in perpetual markets, and the increase in inflows from spot ETFs listed in the United States.
The Chicago Mercantile Exchange (CME) has recently recorded a significant growth in Bitcoin futures contracts, with an increase in open interest of about 9% in the last 24 hours.
This growth has brought the total open interest of the CME to 171,700 BTC, valued at over 12.22 billion dollars. Giving it a 30% market share in the overall open interest of Bitcoin futures.
This dominance of the CME in the futures sector highlights the growing importance of regulated markets and the increasing institutional interest in Bitcoin as an investment asset.
The futures offered by the CME are known for attracting a wide range of institutional investors, thanks to the regulated structure and the transparency of the exchange.
The increase in the volume of open contracts suggests that institutional traders are taking significant positions on Bitcoin.
The rise in funding rates in perpetual markets and inflows from Spot ETFs
A second reason for the increase in open interest on Bitcoin is the rise in funding rates in the perpetual futures markets, which have reached 15% in the last 24 hours.
The funding rates represent periodic payments that are made between traders to keep the price of the perpetual contract close to the market value of the underlying asset.
When the funding rates are high, it means there is a strong inclination towards long positions (bull) in the market.
This growth in funding rates shows a marked interest from traders towards long-term positions on Bitcoin, favoring a bull trend in the price.
However, higher funding rates can also increase the risk of forced liquidations in the event of adverse market movements. Thus contributing to potential future volatility.
According to analysts, the recent demand for long perpetual futures is also fueled by a political climate favorable to risk assets like Bitcoin.
In particular, the possibility of an electoral victory of Donald Trump in the United States is perceived as a bull factor, as a Trump presidency could represent an economic policy favorable to alternative investments.
The third reason that led to the record of open interest is the influx of capital towards spot Bitcoin ETFs listed in the United States, which have experienced strong growth starting from mid-October.
These funds have experienced an evolution since the beginning of the year, moving from cash-and-carry arbitrage strategies to more bull-oriented directional positions.
This shift towards more decisive long strategies has contributed to the demand for Bitcoin and the increase in open interest in the bull market of futures.
Furthermore, the purchase of Bitcoin through an ETF represents an additional signal of institutional interest in this asset.
The opinion of analysts and future implications
The increase in open interest on Bitcoin futures has been analyzed in detail by Checkmate, a cryptocurrency expert, who observed a divergence between directional inflows in ETFs and the open interest of the CME.
According to Checkmate, ETF inflows are increasing significantly, while the open interest of the CME is growing but not to the same extent.
This might suggest that many investors are betting on long strategies, rather than on neutral positions, reflecting an overall more bull market on Bitcoin.
However, not everyone agrees with this view. Andre Dragosch, head of research at Bitwise, argues that the recent increase in open interest on the CME could indicate a return to cash-and-carry arbitrage strategies.
That is, a situation in which institutional investors take neutral positions by taking advantage of the price difference between the spot market and futures.
This type of strategy tends to stabilize the market in the short term, but it could limit Bitcoin’s earning potential in the event of a rapid price rise.