The number of open positions or contract for Chicago Mercantile Exchange [CME] Bitcoin futures is reportedly at an all-time high. This Bitcoin news was first reported by Coindesk. For those who don’t know about CME, then let me tell you, CME is a global market’s company which owns large derivatives, options and futures exchanges in Chicago and New York City using its CME Globex trading platform. In simple words, CME provides financial derivatives market exchange services.
According to the data from the Commodity Futures Trading Commission [CFTC], for the period between May 27 to June 3, the total figure for open contracts stood at 5190. This is the largest number of open contracts ever reported in CME Bitcoin futures, as per Coindesk. If you are wondering why does it matter? The sharp rise in the open contracts is a sign of increased institutional participation in the cryptocurrency market
It has been observed that Large demand in futures contracts usually creates bigger gaps (from the time of close to a new open for the week), thereby risking greater draw down once prices correct. This trend can be found by observing the chart from May 17 and May 31. On May 17 the spot price of Bitcoin dropped to as low as $6,600 before greater buying pressure pushed prices back above $7,300, completing the 11.74 percent gap left in the futures market earlier.
Again on May 31, after climbing to as high as $9,090 on the Coinbase exchange, BTC’s price retraced 11 percent below $8,000 before resuming its bullish trend, pushing back above $8,200 an hour later and completing the 5.5 percent gap left in the futures market, again, four days prior. Lastly, on June 3, open contracts led to a correction to roughly $8,595, which came in to effect early in the morning as Bitcoin’s price fell below $8,400 on most exchanges
According to the data from the CFTC, open interest in short positions sat at 85.1 percent compared to 62.9 percent for Bitcoin longs. When the news about the open contracts from CME was broke, it led to waves across the cryptocurrency market. The financial derivatives market is generally dull, but this was an exception. Many investors are wondering about the possible implications it could have on the short term and long term trading, while others are waiting for the situation to unfold.