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Bitcoin A Strong Competitor To Gold, Suggests CME Managing Director

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Bitcoin has been often compared to gold as the king coin entails several properties that mirror that of gold. The store of value aspect, limited supply of 21 million, and several other characteristics have led to a great majority of people touting Bitcoin as digital gold. While many believe that BTC could flip gold, the entire, gold vs BTC narrative has been on for quite a while. Just as the value of the largest cryptocurrency has been surging, an array of people have been steering towards Bitcoin.

The asset recently got an endorsement from SpaceX CEO Elon Musk. Now, CME Group’s Managing Director and chief economist, Bluford Putnam revealed his take on the king coin.

Bitcoin vs Gold Narrative Prolongs

Gold has been an investor’s favorite for the longest time. Bitcoin seems to be taking over that as millennials and Gen Z has been opting for BTC over gold. Speaking about the same, Putnam told Bloomberg that Bitcoin was emerging as a competitor against gold.

Putnam pointed out that the supply of gold is hazy while Bitcoin’s limited supply of 21 million was quite clear and steady. Albeit this, he urged people to be aware of the volatile nature of crypto. CME’s Chief Economist said,

“When the supply is relatively inelastic, then the dynamics of shifting patterns with demand can have very large and abrupt impacts on prices. Bitcoin has illustrated this point.”

He suggested that BTC was on its way to replace gold as a hedge against inflation. While gold has time and stood as a strong hedge during times of unrest in the past. Putnam, however, suggested that the metal may be slipping in terms of its appeal as a hedge, especially against global political risks. He added,

“In the 2017 to 2020 period, the mostly ups and occasional downs of the gold price appear to be directly tied to Fed policy shifts more than anything else. Since equities were responding to the same driving force, the gold-equity relationship tended to become a little more closely associated, weakening gold’s safe-haven appeal.”

Bitcoin Futures Open Interest Skyrockets To $13B; CME Tops Chart

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Bitcoin continued to break new records as it oscillated back and forth a little below $40k. Following the price recovery in the spot market, optimism was also noted across the derivatives sector.

According to the latest stats compiled by Skew Analytics’ data dashboard, aggregated open interest [OI] in Bitcoin futures across the 12 biggest cryptocurrency exchanges surpassed a whopping $13 billion.

With this, OI hit a fresh ATH yet again on the 14th of January as interest in the market continued to soar high.

CME Tops The Chart For Bitcoin Futures OI

Skew
Bitcoin Futures Open Interest Skyrockets To $13B; CME Tops Chart 3

Out of the total OI figure, CME Group’s bitcoin futures accounted for $2.39 billion as the platform continued to soar in popularity as more institutional investors flock to the sector.

CME was followed by OKEx with $2.08 billion, Binance with $2.05, and Huobi with $1.04 billion. The once leading derivatives giant BitMEX was in the 8th position on the Skew charts amassing an OI of $0.88 billion.

Unlike CME which went on to become the largest market for Bitcoin Futures, ICE’s crypto venture, Bakkt has been laying low in terms of the OI numbers recording a mere $0.05 billion on the same day.

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Bitcoin Futures Open Interest Skyrockets To $13B; CME Tops Chart 4

The latest news comes after a large liquidation event following the biggest price dump of the year. Despite more than $1 billion buy liquidation, the appetite of the futures contract trades appeared to be bullish as depicted by the OI figures. It was clear that the impact of the recent liquidations was in no match for the bullish outlook among the market participants.

Optimism From Professional Traders: Strong Bullish Projection For Bitcoin

The above charts also evidenced more and more inflow of money into the market, as traders expect a near-term rise in the crypto-asset’s volatility which was indeed a positive development for its spot price. Noting the rising optimism, prominent analyst Joseph Young tweeted,

“Bitcoin futures open interest is back to an all-time high once again. Open interest = the sum of all futures contracts in the market. When the market crowded, massive price swings like the Jan. 12 20% drop become more likely. Another flush drop above $42k could happen again.”

Ethereum Breaches $735 Triggering Over 90% Addresses In Profit

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Late Chrismas Gift for Ethereum?

Ethereum had a bullish start for the day as it broke above $700 for the first time since the last week of May 2018. The largest altcoin was seen lacking bullish momentum as its price movement broke away from that of Bitcoin. However, Ethereum soon climbed to $735.93, at the time of writing after multiple pullbacks close to the coveted level.

According to the crypto-analytic platform, Glassnode, the latest surge triggered 90% of all Ethereum addresses [which roughly amassed for 47 million addresses] holding ETH are now in a state of profit. The last time this number was witnessed to be this high was back in January 2018.

The infamous Black Thursday crash is worth noting in this context because Ethereum has come a long way since then. In March of this year, only 3.2% of all ETH addresses were in profit as opposed to 90% following the spectacular price rise right after Christmas.

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Here’s what Messari’s Ryan Watkins has to say about the latest uptrend:

“2021 prediction: In 2021 we begin seeing institutions buy $ETH. Once you accept that Bitcoin may be valuable, it opens your mind to the possibility that other cryptoassets may also be valuable. It’s a much easier jump from $BTC to $ETH from there.”

While Bitcoin continued to be the darling of institutional investors and corporations, Ethereum was not far behind either. Amassing a market cap of $83 billion, Ether’s success story among institutional investors can be attributed to strong fundamentals. Especially, the decentralized finance [DeFi] sector happened to be one of the hottest and the most exciting thing in the cryptocurrency industry this year.

This helped the second-largest network to hold on to the leadership status as the enormous majority of DeFi projects were based on the Ethereum blockchain. In addition, the growing network activity, in turn, led to increased ETH transaction fees and strong demand for the underlying token.

The growing conviction around Ethereum as an asset class was witnessed this year. This was further evidenced by the Chicago Mercantile Exchange’s [CME] announcement of an upcoming launch of a futures contract on Ether in February 2021. This development was touted as a game-changer for the ETH ecosystem.

To top that, the Grayscale Ethereum Trust [ETHE] registered over $1.7 billion in assets under management [AUM]. It was also found that the shares of ETHE [OTCMKTS: ETHE] had surged by 700% YTD. This has also intensified the bullish outlook as many market participants now believe that once the Bitcoin rally subsides, there will be a capital inflow into altcoins with ETH being the first choice of high-profile investors.

Binance, CME Bitcoin Futures Hits Fresh High As BTC Flirts With $20K

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Bitcoin’s short-lived stint with the $19,348-level has triggered immense volatility not just across the spot market but also in the derivatives space of the cryptocurrency realm. As it geared up for retaking its previously established peak, trading volume figure on one of the world’s leading cryptocurrency exchange, Binance surged substantially.

What’s more, Bitcoin Futures open interest [OI] has also increased to record-setting heights on the platform. The figures climbed to a fresh all-time high of about $1.2 billion as the bullish momentum of the cryptocurrency continued. With this, Binance now holds approximately a quarter of the value of the Bitcoin futures market, which currently stood at $4.1 billion.

Over the past month, Bitcoin futures aggregated trading volume has been higher than its previous months, thanks to the renewed optimism among the market participant prompted by the latest bull run. Notably, Binance’s figures saw tough competition from yet another cryptocurrency exchange and derivatives platform OKEx.

skew btc futures aggregated daily volumes

 

Bitcoin Futures Figures Breaking Record Across Platforms

As Bitcoin flirted with a new high, a more sophisticated product, Chicago Mercantile Exchange [CME] also witnessed its Bitcoin futures figures spike to fresh peaks surpassing high June-July levels. The daily trading volume rose to an ATH of $1.8 billion. The previous high of $1.5 billion was recorded on the 23rd of November during which Bitcoin being traded at $18.3k.

According to the latest Skew charts, CME’s open interest also recorded its highest level at $1.2 billion.

skew cme bitcoin futures total open interest volumes

This comes amid a massive surge of institutional capital inflows to the world’s leading cryptocurrency and its derivatives markets as billionaires and institutional investors were warming to the digital asset. Hence, these trends evidenced that not just retail but also new institutional investors were seeking exposure to Bitcoin.

Several experts have noted that the current rally was catapulted by the increasing investment from not only institutional investors, investment banks but also more importantly payment companies. This included popular giants in the payments realm such as PayPal and Mastercard as they launched crypto offerings for their huge userbase this year.

Bakkt Bitcoin Futures Records 36% Increase In Daily Volume Since Previous ATH

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Bitcoin Futures, have managed to amass immense traction across the globe. While several platforms have begun exploring the prospects of Bitcoin Futures, the existing ones continue to score big. Prominent crypto asset custody platform, Bakkt recently revealed that it had quashed its own record for Bitcoin Futures Trading Volume.

Still Behind CME

Intercontinental Exchange’s [ICE] crypto derivatives platform, Bakkt, revealed on Twitter that it had recorded a new high in Bitcoin Futures volume. The platform nearly accumulated a total volume of $200 million surpassing its previous record by 36%. The tweet read,

“Another record day in the books for our physically delivered futures:

15,955 Bakkt Bitcoin Futures were traded today, representing over $200M of volume and a 36% increase from our previous all-time high”

Bakkt’s previous all-time high was about $125 million, where a total of 11,706 Bitcoin Futures were traded on 28 July 2020.

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Back when ICE announced the launch of Bakkt, challenging the already well established Chicago Mercantile Exchange [CME], the fervor around the project left the crypto community with high expectations for the project. Even though investors considered Bakkt as a catalyst for Bitcoin’s potential bull runs, the platform did not spiral as expected. Bakkt witnessed dainty gains compared to other projects. The latest instance substantial proof of the same.

Today, as Bakkt recorded its latest all-time high of $200 million in volume, CME went on to bag $262 million in volume. The highest Bitcoin Futures volume, CME has recorded was about $1.1 billion. The disparity between these two platforms questions the “competitor” tag that they have been given.

CME wasn’t the only platform that overtook Bakkt, prominent cryptocurrency exchanges like Binance, Huobi as well as OKEx were seen recording increased value. Malta-based Binance recorded trade worth, $2.65 billion over the last 24-hours for BTC-USD perpetual contracts. Huobi garnered a total of $1.28 billion via its BTC/USD perpetual contract.

Crypto Derivatives Volume Soar to Fresh ATH in August; Catalyzed by Bitcoin’s Rally Above $12,000

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While the lack of positive jurisdiction may have driven the cryptocurrency industry into a gray area, but the derivatives sector has come to the rescue. It has undoubtedly driven a new cycle of crypto adoption.

The crypto industry has seen developments on various fronts and thanks to the foray of many institutional investors, space has matured significantly from narratives such as ‘Wild West’ or another ‘dot-com bubble’.

Over the past few years, crypto derivatives have played an important role and this was evident in its soaring trading volumes. According to the latest Exchange Review report by CryptoCompare, derivatives volume has soared to a fresh all-time high in August.

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Trading volumes of derivatives surged by a staggering 53.6% in August driving the figures to a massive $711.7 billion. With this, the trading volume surpassed the previous high of May when it registered $602 billion in monthly volumes.

Along with the derivatives, volumes for spot also increased by 49.6% taking its figures to $944.9 billion in August. Interestingly, this month saw a period of high volatility coupled with Bitcoin’s price movement climbing to the 2020-peak above $12,300. This could have potentially triggered the surge of trading volume as trading activity in derivatives as well as their underlying cryptocurrencies intensified.

This was a promising sign of the market maturing as institutional investors remained overall optimistic despite several pullbacks.

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Besides, derivatives exchanges also saw a significant increase in trading volume in August, according to the report. Huobi dominated the chart with a trading volume of $208.5 billion after rose by 44.7%.

Next in the line was OKEx, which was up by 69.1% and reported a volume of $190.8 billion following Binance with $184.6 billion volume traded after surging by 74% in August. In addition, BitMEX traded $72.5 billion and registered an increase of 43.6%.

The report further noted,

“Trading activity remained high in August compared to July. The top 4 exchanges Huobi, OKEx, Binance and BitMEX represented 90% of the volume traded throughout the month.”

Monthly CME futures contract volumes have also noted a substantial uptick of 36.3% since July as it touched 203,867 contracts traded in August. Additionally, another institutional investing platform, Bakkt recently surpassed its highest-ever figure of $147 million in volume with 12,791 contracts traded on 25th August as previously reported by TWJ.

Bakkt Volume Smashes Previous Record, Hits New ATH at $147 Million

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Almost a month after breaking its record twice in two consecutive days, volumes on Bitcoin futures offered by Intercontinental Exchange [ICE] subsidiary, Bakkt, hit yet another milestone.

The institutional investing platform registered its highest-ever figure of $147 million in volume with 12,791 contracts traded on 25th August, as per the data from the crypto-analytic site, Skew. As compared to its previous high in July for Bitcoin’s monthly futures, Bakkt’s figures were up by 15%.

skew bakkt bitcoin futures total open interest volumes 1

On the other hand, the open interest [OI], which is an indicator of the total number of outstanding contracts held by investors, declined and was found to be at $9.5 million. This may be due to the fact that the latest move followed a correction in the underlying asset price that plunged to $11,397 as opposed to its previous high, which was driven by Bitcoin breaking the almost three-month range-bound trading channel.

Bakkt’s physically-settled contracts which are paid out in BTC registered a volume of $134 million while its cash-settled contracts, which are delivered in US Dollars, accounted for $13 million.

However, New York Stock Exchange-owned Bakkt wasn’t the only institutional exchange that recorded a new peak. Its rival, Chicago Mercantile Exchange [CME] also saw nearly a month-high surging to a volume of $935 million while its open interest was found to be at $713 million, according to data from Skew Analytics.

skew cme bitcoin futures total open interest volumes

Leading cryptocurrency exchange and derivative platform, OKEx‘s ‘BTC Top trader sentiment index’ also spiked to 0.59 as volumes rose to $4.5 billion despite a low open interest. However, these figures were still negligible when compared in a macro aspect of the derivatives market.

The aggregated daily volume of the collective derivatives platform, as noted by Skew, suffered from poor figures in August. It continued to remain below $20 billion for the most part of the month since the underlying asset’s price sustained major corrections and failed to breach $12,000 despite multiple breakout attempts.

However, with the latest surge, the aggregated daily volume also rose, though not significantly, to $17 billion, a level that was last seen on 19th August when Bitcoin’s price soared to $12,278. Could this spur a rally for Bitcoin in the near-term?

Bitcoin: BTC is Above $11.5k But Will it Drop Down to $9.6k to Fill CME Gap?

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Bitcoin has been moving in just one direction since 21 July, that’s up. The rally, which appears literally vertical on the 1-day chart, has been relentless. Bitcoin is up by 26.15 percent over the past 10 days and the asset went on to register its new yearly high at $11,700 over the past few hours.

However, with every Bitcoin rally, the common question that arises is what will cause Bitcoin to drop now after witnessing such a rapid rise. On Twitter, the following narrative is starting to gain traction.

What is this Bitcoin CME Gap?

Now, between 24th July and 27th July, Bitcoin’s valuation on CME futures skipped a range when the prices started trading at $9915 on 27th July, from $9600 on the 24th of July. Now this CME gap is nothing but the exchange closing down on the weekends for trading. As an asset, Bitcoin is traded 24×7 on other spot exchanges but on CME futures, the exchange is non-operational on Saturday and Sunday.

Hence, the trading on CME would begin on the spot prices evident on Monday morning and not on the valuation it ended on during Friday evening. Hence, from time to time these gaps take place and according to certain traders and analysts, Bitcoin’s movement over time tends to fill on these gaps. In order to under the paradigm better, we analyze some of the CME gaps since 2018.

CME Gaps; How has Bitcoin responded?

Bitcoin gaps e1596292894342

As illustrated in the above, Bitcoin CME gaps over the past 2 and a half years have occurred only a few times. Even though CME closes trading on every weekend, it is definitely not a regular occurrence.

Now after analysis, It can be observed that certain gaps have been filled by Bitcoin’s movement over the years. The gap formed on May 7th, 2019 was filled during the rally in April this year.

Whereas, a minor gap was formed on 14th August 2019 and it was recently filled by Bitcoin recently between 29th and 30th July. As mentioned earlier, a certain group of traders was varying about the gap left at $9600 on 24th July, and they believed that there is a chance Bitcoin may fill this gap up over the next few days.

So Bitcoin filling CME gap; is it 100% accurate?

Frankly, no there is no confirmation to whether Bitcoin absolutely fills these gaps whenever they take place. Coincidently, the asset has been filling them lately but that doesn’t mean it happens every time. For example, there is still a gap that formed during early 2018(check chart) at $3700, that hasn’t bee filled over the past years.

If Bitcoin did fill all the CME gaps, the asset should take care of this one as well but it is unlikely to happen. For Bitcoin’s spot prices to nose-dived till $3700, something major has to go wrong with the digital asset industry.

Hence, a correction down to $9600 is definitely possible, but it will not be because of the CME gap left behind, hence do not bet on it.

Bitcoin Bakkt Futures Settles 11,706 BTC; CME Reaches an OI of $726 million

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The domino effect in play for Bitcoin seems to be in full throttle.

After bitcoin surpassed its yearly high in February, the largest digital asset created a ripple effect in multiple directions. With on-chain fundamentals improving in the charts, Bitcoin’s derivatives market was incurring major change as well.

CME and Bakkt have been two of the most important exchanges for Bitcoin that have promoted the involvement of institutional investors in the digital asset space.

Many believed that Bitcoin’s next major bullish rally would emerge from the participation of accredited investors, and according to recent developments, things are likely to move in that direction at the moment.

skew bakkt bitcoin futures total open interest volumes

According to Skew analysis, Bakkt futures reportedly recorded its highest BTC physically-settled contracts, amassing a whopping 11,705 futures on 29th July. The futures contracts were valued at over $125 million. The platform that is backed by Intercontinental Exchange, announced on Twitter,

Now alongside Bakkt, CME was registering a heightened level of activity on its platform as well.

According to data, the Open-Interest in CME cash-settled Bitcoin futures surpassed its previous all-time high with a massive surge of up to $724 million.

skew cme bitcoin futures total open interest volumes

At illustrated in the above chart, the OI on the CME platform witnessed a huge spike over the past 48-hours which led to the exchange passing its previous high of  $530 million.

CME’s high open-interest is currently accompanied by an average daily volume of $308 million as compared to $285 million witnessed in the month of June. Although, the daily volume had spiked up to $1.7 billion in the charts during the Open-Interest rally.

Implied Volatility spikes after consistent lows

skew btcusd iv vs rv

One of the surprising trends consistent throughout the year has been Bitcoin’s volatility. Despite a high level of activity in February, April-May, and now in July, volatility has been under the radar. Bitcoin’s volatility has been so low that other traditional stocks appeared to be more volatile in nature than Bitcoin.

However, the recent spike is creating a bit of a change. Bitcoin’s Implied and Realized Volatility, both underwent a minor spike during the recent rally. Both the volatility levels had recently registered their yearly-low at 3.1% and 3.0% respectively, so it will probably take a while before it reaches previous high levels.

Low volatility levels are a positive sign from a long-term perspective as they indicate the maturity of an asset.

Bitcoin’s Accredited Investors Continue to Remain Active as CME Incur Higher Premium Than Retail Platforms

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March 2020 would be a month to forget for the global financial industry. With the traditional markets registering some of their worst declines since the late 1980s, major stocks such as Dow Jones and S&P 500 were still trying to recover some of their losses.

The digital asset industry has been the same as Bitcoin lost over 38 percent of its valuation on 13th March. However, the crypto markets have witnessed a faster recovery rate in comparison to traditional stocks and Bitcoins’ derivatives market is one of the prime examples.

Now, According to a recent Arcane Research, it was observed that Bitcoin Futures over the past week have started trading at positive premiums again. It was a major improvement in terms of market sentiment as, during the 3rd week of March, the premium on both institutional and retail exchanges were exhibiting a negative rate.

There was another key difference response observed in the charts.

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The reports suggested that at the time of writing, CME BTC futures contracts were trading at a higher annualized premium of 7.39 percent whereas the collective retail exchanges such as BitMEX, Deribit only registered a lowly premium of 0.19 percent.

The above data is crucial because it highlighted the fact that institutional investors were more bullish in the market than retail but the scenario was completely divergent during the early-year bullish run.

During January-February 2020, the retail exchanges had an upper hand in terms of higher premium rates and many speculated that these exchanges were majorly responsible for Bitcoins’ early year rally.

In spite of CME’s current positive outlook, it is not surprising that institutional exchanges were doing better than retail platforms.

During the crash on 13th March, the open-interest and 24-hour trading volume on BitMEX, OKEx, Huobi, and Deribit exhibited a massive drop with pushed the entire market towards a panic sell-off. The number of put sales order went above the usual margin as people contemplated the prices to fall further.

However, a similar sentiment did not precipitate on the institutional end.

Although a drop in OI was observed on CME as well, the drop in these institutional exchanges was not as dramatic in comparison to retail.

Bakkt’s BTC futures contracts accommodated a similar situation as after a minor dip in trading volume after the crash, the total trading volume jumped backed to normal levels over the same week.

Hence, it can be implied that licensed investors on Bitcoin were keeping their fate on the future of Bitcoin’s valuation and were unnerved after the collapse in March.

Backwardation may lead to another pullback?

However, in spite of the positive sentiment on CME and Bakkt, a phase of backwardation was currently evident in Bitcoin’s market which suggested that many expected Bitcoin’s price to fall further in the charts. Therefore, a lot of people were holding off their investment and waiting for the current prices to drop below the spot prices.

Such a scenario may have major implications in the future since any move upwards with low Bitcoin trading volume with lead to the formation of a weak bottom.

Bitcoin would be highly vulnerable to another pullback. Therefore, a breakaway from backwardation is still crucial for a possible bull run ahead.