On Oct. 14, Wilshire Phoenix investment firm released its Efficient Price Discovery report, which detailed how CME Bitcoin (BTC) futures impact Bitcoin price discovery. The firm concluded that "CME Bitcoin futures contribute more to price discovery than its related spot markets." And the researchers also suggested that: "CME Bitcoin futures have grown to become significant, this is not only demonstrated through trading volume and open interest, but also by influence on spot price formation." Wilshire's analysis correctly states that price discovery in traditional markets is a contested topic. The report also adds that studies on price formation often find that …

According to CME, the amount of Bitcoin (BTC) long contracts held by institutions are at an all-time high. Yet, CME’s most recent Commitment of Trader report shows hedge funds are at a record-high for BTC shorts. There seemingly is a major difference in the perception of Bitcoin’s short to medium-term trend between hedge funds and institutions. Why are hedge funds aggressively shorting Bitcoin but not institutions? Hedge funds typically implement varying strategies to generate returns for investors. Oftentimes, hedge funds will utilize derivatives and employ a more high-risk strategy. In contrast, institutional investors who are allocating a percentage of their …

Bitcoin (BTC) options aggregate open interest has increased to $2 billion, which is 13% below the all-time high. Although the open interest is still heavily concentrated on Deribit exchange, the Chicago Mercantile Exchange (CME) has also reached $300 million. In simple terms, options derivatives contracts allow investors to buy protection, either from the upside (call options) or downside (put options). Even though there are some more complex strategies, the mere existence of liquid options markets is a positive indicator. For example, derivative contracts allow miners to stabilize their income which is tied to a cryptocurrency’s price. Arbitrage and market-making firms …

Data from Arcane Research shows Bakkt Bitcoin exchange saw another record-high month from Sept. 20 to Oct. 20. This follows a noticeable rise in institutional demand for Bitcoin (BTC) from public companies in recent months. Bakkt, the digital asset payment platform and derivatives exchange, is tailored for institutional investors in the U.S. It is operated by Intercontinental Exchange, the parent company of the New York Stock Exchange. When the volume of the Bakkt Bitcoin futures market increases, which physically settles Bitcoin contracts, it typically demonstrates growth in institutional appetite for digital assets. CME, LMAX Digital, and Bakkt volumes show the …

Multiple JPMorgan Chase experts analyzed Bitcoin’s current price when compared to other commodities, and noted that the asset could see selling pressure ahead. “The JPMorgan strategists said they calculated an intrinsic value by effectively treating Bitcoin as a commodity and looking at the marginal cost of production,” according to an Oct. 14 article from India’s BloombergQuint media outlet — a partnered entity involving Bloomberg and Quintillion Media. The article added: “Bitcoin faces a ‘modest headwind’ in the short term based on an analysis of bets in the futures market and an estimate of the cryptocurrency’s intrinsic value, according to JPMorgan …

On Oct. 7 Cointelegraph reported that top crypto traders had kept a bearish stance since mid-September and at the time the Bitcoin (BTC) long-to-short ratio had reached its lowest level in 10 weeks. All of this changed in a matter of hours as soon as BTC broke through the $11,000 resistance. Whenever Bitcoin's volatility gets too low, it usually signals that traders became too complacent. Naturally, there will be periods of range trading, but short-term unpredictability is Bitcoin's defining characteristic. For pro traders, implied volatility is commonly known as a fear index because it measures the average premium being paid …

October has barely started and the price action in the crypto markets has been both exciting and worrisome. Bitcoin (BTC) has seen a strong $10.9K rejection and a quick $10.2K bottom over the past week. The whipsaw price action has been the norm over the past three weeks and is quite gruesome for the bulls and bears. Regardless of the reason behind these moves, the recent newsflow of negative crypto events has clearly spooked investors. In the last two weeks KuCoin was hacked for $150 million, BitMEX was charged with multiple legal violations, John McAfee's was arrested, and the UK's …

For BitMEX, 2020 has been quite a rough year and from the look of things it’s only set to get worse. The popular derivatives exchange is no longer as relevant and impactful on crypto market price action as it was 2 years ago, but a significant short-term price correlation among top exchanges has been proven repeatedly. A well-documented case occurred in May 2019, when a large sell order on Bitstamp caused a cascading $250 million liquidation on BitMEX. The following month, a Coinbase exchange outage triggered a $1,400 Bitcoin (BTC) price nosedive, as reported by Cointelegraph. A well circulated report …

Open interest for Bitcoin options hit their all-time high of $2.14 billion on Sept. 24, a day before a huge quarterly expiry of 89,100 contracts — i.e., 47% of existing options contracts at the time. Options are derivative contracts that give the holder the right (though not an obligation) to purchase or sell an underlying asset at a predetermined price, also known as the “strike price.” Observing the OI trends before every monthly and quarterly expiry, there are spikes just before the date of expiry, and they have been incremental after each expiry, pointing toward the increased liquidity in the …

BitMEX used to be the indisputable leader of Bitcoin (BTC) futures trading and if something similar to yesterday's civil enforcement action were to happen back in 2015-2018 the crypto markets would have completely collapsed. Regardless of partial recovery to $10,600, which was relatively quick, derivatives markets held steady during the $500 drop down to $10,400. Neither BTC futures or options displayed any signs of discomfort to the negative news. The futures market nearly ignored the entire event and this is a strong indicator that investors remain bullish. It also suggests that markets will be testing $12,000 sooner than one might …

As of now, the $622 million total open interest for BTC futures expiry on Friday seems quite relevant. This Friday, a total of $100 million in CME Bitcoin (BTC) options are set to expire. 58% of these are call (buy) options, meaning buyers can acquire BTC futures at a fixed price. As the expiry draws near, call options 10% or higher above the current BTC price are deemed worthless. Therefore, there’s not much to gain in rolling over this position for October. September CME call options open interest (contracts). Source: CME Each CME contract represents 5 BTC, and the chart …

The $900 Bitcoin (BTC) price drop over the past two days might have been scary for novice traders, but those trading futures and options don't seem bothered. Cryptocurrency daily market performance snapshot. Source: Coin360 As Bitcoin price rallied to $11,000 on Sept. 19, investors may have become overly excited as the price briefly broke an important resistance level. The steady rally lasted ten days and saw Bitcoin’s dominance rate rebound for a 15-month low and this had some traders calling for a return to the $12,000 level. This sentiment began to shift once it was clear BTC would not be …