Značka: cme

Bitcoin price can’t find its footing, but BTC fundamentals inspire confidence in traders

Bitcoin’s (BTC) sudden crash on Jan. 10 caused the price to trade below $40,000 for the first time in 110 days and this was a wake-up call to leveraged traders. $1.9 billion worth of long (buy) futures contracts were liquidated that week, causing the morale among traders to plunge.The crypto “Fear & Greed” index, which ranges from 0 “extreme fear” to 100 “greed” reached 10 on Jan. 10, the lowest level it has been since the Mar. 2020 crash. The indicator measures traders’ sentiment using historical volatility, market momentum, volume, Bitcoin dominance and social media.As usual, the panic turned out to be a buying opportunity because the total crypto market capitalization rose by 13.5%, going from a $1.85 trillion bottom to $2.1 trillion in less than three days. Currently, investors seem to be digesting this week’s economic data that shows United States December 2021 retail sales going down by 1.9% compared to the previous month.Investors have reason to worry about stagflation, a scenario where inflation accelerates despite the lack of economic growth. However, even if this eventually proves that Bitcoin’s digital scarcity is a positive characteristic, markets will still take shelter with whatever asset is deemed safe. Thus, the first wave will potentially be damaging for cryptocurrencies.Top weekly winners and losers on Jan. 17. Source: NomicsBitcoin price was flat over the past seven days, effectively underperforming the altcoin market’s 7% gain. Part of this unusual movement can be explained by layer-1 decentralized applications platforms showing a positive performance that was driven by Fantom (FTM), Cardano (ADA), Near Protocol (NEAR) and Harmony (ONE).Loopring (LRC), a zkRollup open protocol for decentralized exchanges on Ethereum, presented the worst performance of the week. The DEX volume using the protocol peaked at $30 million per day in early December 2021, but is now near $6 million. Meanwhile, Dfinity (ICP) and Chainlink (LINK) are adjusting after a 40% or higher rally in the first 10 days of 2022.Tether’s premium and the futures premium held up wellThe OKEx Tether (USDT) premium or discount measures the difference between China-based peer-to-peer (P2P) trades and the official U.S. dollar. Figures above 100% indicate excessive demand for cryptocurrency investing. On the other hand, a 5% discount usually indicates heavy selling activity.OKEx USDT peer-to-peer premium vs. USD. Source: OKExThe Tether indicator bottomed at a 3% discount on Dec. 31, which is slightly bearish but not alarming. However, this metric has held a decent 2% discount over the past week, signaling no panic selling from China-based traders.To further prove that the crypto market structure has held, traders should analyze the CME’s Bitcoin futures contracts premium. That metric analyzes the difference between longer-term futures contracts to the current spot price in regular markets.Whenever this indicator fades or turns negative, it is an alarming red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.BTC CME 2-month forward contract premium vs. Bitcoin/USD. Source: TradingViewThese fixed-month contracts usually trade at a slight premium, indicating that sellers request more money to withhold settlements for longer. As a result, futures should trade at a 0.5% to 2% premium in healthy markets, a situation known as contango.Notice how the indicator flipped negative on Dec. 9 as Bitcoin traded below $49,000 but it still managed to sustain a slightly positive number. This shows that institutional traders display a lack of confidence, although it is not yet a bearish structure.Considering that the aggregate cryptocurrency market capitalization is down 9.5% to date, the market structure held rather nicely. The CME futures premium would have gone negative if there had been excessive demand for short-sellers. Unless these fundamentals change significantly, there is not yet sufficient information available that would support calls for a sub-$40,000 Bitcoin price.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Interest wanes in Bitcoin futures ETF’s as contracts fall below 5K

After a stellar launch, interest has waned in the ProShares Bitcoin Strategy Exchange Traded Fund (BITO) which now has the lowest amount of CME contracts since Nov. 2021.The Bitcoin futures exchange traded fund (ETF) holds a total of 4,904 Chicago Mercantile Exchange (CME) futures contracts, according to the fund’s latest update from Jan. 11. A Bitcoin futures ETF allows investors to speculate on the future price of Bitcoin (BTC) without having to hold the asset themselves.BITO’s assets under management (AUM) figure has retraced to $1.16 billion from a high of $1.4 billion last Nov. This is about the same amount it held two days after its Oct. 18 launch when it became the fastest fund to reach $1 billion in AUM ever.Arcane Research discussed possible reasons for the BITO retrace in its latest Weekly Update. As you might expect, the poor price performance of BTC over the past two months is the chief explanation, as Bitcoins drifts ever further from the $69,000 it reached on Nov. 10 down to its current price around $43,700. Arcane suggests another explanation for the declining interest in BITO is the high cost that comes with operating a futures-based ETF, with the rolling costs required each month to stay ahead of the current BTC price driving up costs:“BITO sells its front-month exposure to buy the next-month contract each time the contract approaches expiry.”Arcane believes that a spot-based BTC ETF would not be subject to the same high fees that grow over time. The SEC has not yet approved any such ETFs, but a ruling on the filing by Fidelity Investments is scheduled to be made by Jan. 20.Other BTC futures ETFs have also failed to significantly increase their AUMs, which are a fraction of the assets of BITO. Valkyrie’s Bitcoin futures ETF (BTFD), which launched just days after BITO, currently holds $71.9 million. Related: Bitcoin holdings of public companies surged in 2021Although the VanEck Bitcoin Strategy ETF (XBTF) has increased its AUM by $6 million since its Nov. 16 launch, it currently holds just $15.8 million according to Dividend.com.

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5 ways derivatives could change the cryptocurrency sector in 2022

We‘ve all heard stories of billion-dollar future contracts liquidations being the cause of 25% intraday price crashes in Bitcoin (BTC) and Ether (ETH) but the truth is, the industry has been plagued by 100x leverage instruments since BitMEX launched its perpetual futures contract in May 2016.The derivatives industry goes far beyond these retail-driven instruments, as institutional clients, mutual funds, market makers and professional traders can benefit from using the instrument‘s hedging capabilities. In April 2020, Renaissance Technologies, a $130 billion hedge fund, received the green light to invest in Bitcoin futures markets using instruments listed at the CME. These trading mammoths are nothing like retail crypto traders, instead they focus on arbitrage and non-directional risk exposure.The short-term correlation to traditional markets could riseAs an asset class, cryptocurrencies are becoming a proxy for global macroeconomic risks, regardless of whether crypto investors like it or not. That is not exclusive to Bitcoin because most commodities instruments suffered from this correlation in 2021. Even if Bitcoin price decouples on a monthly basis, this short-term risk-on and risk-off strategy heavily impacts Bitcoin‘s price.Bitcoin/USD on FTX (blue, right) vs. U.S. 10-year yield (orange, left). Source: TradingViewNotice how Bitcoin‘s price has been steadily correlated with the United States 10 year Treasury Bill. Whenever investors are demanding higher returns to hold these fixed income instruments, there are additional demands for crypto exposure.Derivatives are essential in this case because most mutual funds cannot invest directly in cryptocurrencies, so using a regulated futures contract, such as the CME Bitcoin futures, provides them with access to the market.Miners will use longer-term contracts as a hedgeCryptocurrency traders fail to realize that a short-term price fluctuation is not meaningful to their investment, from a miners‘ perspective. As miners become more professional, their need to constantly sell those coins is significantly reduced. This is precisely why derivatives instruments were created in the first place.For instance, a miner could sell a quarterly futures contract expiring in three months, effectively locking in the price for the period. Then, regardless of the price movements, the miner knows their returns beforehand from this moment on.A similar outcome can be achieved by trading Bitcoin options contracts. For example, a miner can sell a $40,000 March 2022 call option, which will be enough to compensate if the BTC price drops to $43,000, or 16% below the current $51,100. In exchange, the miner‘s profits above the $43,000 threshold are cut by 42%, so the options instrument acts as insurance.Bitcoin‘s use as collateral for traditional finance will expandFidelity Digital Assets and crypto borrowing and exchange platform Nexo recently announced a partnership that offers crypto lending services for institutional investors. The joint venture will allow Bitcoin-backed cash loans that can t be used in traditional finance markets.That movement will likely ease the pressure of companies like Tesla and Block (previously Square) to keep adding Bitcoin to their balance sheets. Using it as collateral for their day-to-day operations vastly increases their exposure limits for this asset class.At the same time, even companies that are not seeking directional exposure to Bitcoin and other cryptocurrencies might benefit from the industry‘s higher yields when compared to the traditional fixed income. Borrowing and lending are perfect use cases for institutional clients unwilling to have direct exposure to Bitcoin‘s volatility but, at the same time, seek higher returns on their assets.Investors will use options markets to produce “fixed income”Deribit derivatives exchange currently holds an 80% market share of the Bitcoin and Ether options markets. However, U.S. regulated options markets like the CME and FTX US Derivatives (previously LedgerX) will eventually gain traction. Institutional traders dig these instruments because they offer the possibility to create semi “fixed income” strategies like covered calls, iron condors, bull call spread and others. In addition, by combining call (buy) and put (sell) options, traders can set an options trade with predefined max losses without the risk of being liquidated.It‘s likely that central banks across the globe will worldwide keep interest rates near zero and below inflation levels. This means investors are forced to seek markets that offer higher returns, even if that means carrying some risk. This is precisely why institutional investors will be entering crypto derivatives markets in 2022 and changing the industry as we currently know.Reduced volatility is comingAs previously discussed, crypto derivatives are presently known for adding volatility whenever unexpected price swings happen. These forced liquidation orders reflect the futures instruments used for accessing excessive leverage, a situation typically caused by retail investors.Yet, institutional investors will gain a broader representation in Bitcoin and Ether derivatives markets and, therefore, increase the bid and ask size for these instruments. Consequently, retail traders‘ $1 billion liquidations will have a smaller impact on the price.In short, a growing number of professional players taking part in crypto derivatives will reduce the impact of extreme price fluctuations by absorbing that order flow. In time, this effect will be reflected in reduced volatility or, at least, avoid problems such as the March 2020 crash when BitMEX servers “went down” for 15 minutes.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Crypto regulation is coming, but Bitcoin traders are still buying the dip

Looking at the Bitcoin chart from a weekly or daily perspective presents a bearish outlook and it’s clear that (BTC) price has been consistently making lower lows since hitting an all-time high at $69,000.Bitcoin/USD on FTX. Source: TradingViewCuriously, the Nov. 10 price peak happened right as the United States announced that inflation has hit a 30-year high, but, the mood quickly reversed after fears related to China-based real estate developer Evergrande defaulting on its loans. This appears to have impacted the broader market structure. Traders are still afraid of stablecoin regulation This initial corrective phase was quickly followed by relentless pressure from regulators and policy makers on stablecoin issuers. First came VanEck’s spot Bitcoin ETF rejection by the U.S. Securities and Exchange Commission on Nov. 12. The denial was directly related to the view that Tether’s (USDT) stablecoin was not solvent and concerns over Bitcoin’s price manipulation.On Dec. 14, the U.S. Banking, Housing and Urban Affairs Committee held a hearing on stablecoins focused on consumer protection and their risks and on Dec. 17, the U.S. Financial Stability Oversight Council (FSOC) voiced its concern over stablecoin adoption and other digital assets. “The Council recommends that state and federal regulators review available regulations and tools that could be applied to digital assets,” said the report.The worsening mood from investors was reflected in the CME’s Bitcoin futures contracts premium. The metric measures the difference between longer-term futures contracts to the current spot price in regular markets. Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is also known as backwardation and indicates that bearish sentiment is present.Bitcoin CME 2-month forward contract premium versus Coinbase/USD. Source: TradingViewThese fixed-month contracts usually trade at a slight premium, indicating that sellers are requesting more money to withhold settlement for longer. Futures should trade at a 0.5% to 2% annualized premium in healthy markets, a situation known as contango.Notice how the indicator moved below the “neutral” range after Dec. 9 as Bitcoin traded below $49,000. This shows that institutional traders are displaying a lack of confidence, although it is not yet a bearish structure.Top traders are increasing their bullish betsExchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.There are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.Exchanges top traders Bitcoin long-to-short ratio. Source: Coinglass.comDespite Bitcoin’s 19% correction since Dec. 3, top traders at Binance, Huobi, and OKEx have increased their leverage longs. To be more precise, Binance was the only exchange facing a modest reduction in the top traders’ long-to-short ratio. The figure moved from 1.09 to 1.03. However, this impact was more than compensated by OKEx traders increasing their bullish bets from 1.51 to 2.91 in two weeks.Related: SEC commissioner Elad Roisman will leave by end of JanuaryThe lack of a premium in CME 2-month future contracts should not be considered a ‘red alert’ because Bitcoin is currently testing the $46,000 resistance, its lowest daily close since Oct. 1. Furthermore, top traders at derivatives exchanges have increased their longs despite the price drop.Regulatory pressure probably won’t lift up in the short term, but at the same time, there’s not much that the U.S. government can do to suppress stablecoin issuance and transactions. These companies can move outside of the U.S. and operate using dollar-denominated bonds and assets instead of cash. For this reason, currently, there is hardly a sense of panic present in the market and from data shows, pro traders are buying the dip.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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CME Group launches micro Ether futures as ETH hovers at $4K

Major derivatives marketplace Chicago Mercantile Exchange Group has expanded its crypto offerings to include a micro Ether futures product.In a Monday announcement, the CME Group said it had launched a micro Ether (ETH) futures contract sized at 0.1 ETH, giving institutional and individual traders another product for Ether exposure. The cash-settled micro ETH derivatives offering is trading under the Globex code METZ1 and joins crypto derivatives products at the exchange including micro Bitcoin (BTC) futures, Bitcoin futures, options on Bitcoin futures and Ether futures. The newest member of the CME Group cryptocurrency product family has arrived. Micro Ether futures are available for trading. https://t.co/bJoZWA7qZz— CME Group (@CMEGroup) December 6, 2021Tim McCourt, CME Group’s global head of alternative investment products, said the offering would allow investors “to hedge their spot Ether price risk or more nimbly execute Ether trading strategies.” Genesis Global Trading, one of the liquid providers for CME Group’s crypto derivatives offerings, said it had already executed a contract for the micro ETH futures product in partnership with crypto investment firm XBTO.“The Micro Ether futures contract fills a need for greater flexibility and more precise delta hedging,” said Joshua Lim, Genesis’ head of derivatives. Related: Kelly Strategic Management files for Ethereum futures ETFThe announcement came following the price of ETH and many cryptocurrencies including Bitcoin falling significantly over the weekend. According to data from Cointelegraph Markets Pro, the ETH price has dropped more than 15% since hitting an all-time high of $4,785 on Nov. 8. At the time of publication, the price of the second-largest cryptocurrency by market capitalization is $4,016, having fallen more than 13% in the last seven days.CME Group first launched its Bitcoin futures contracts in December 2017 amid the major bull run. The exchange’s micro Bitcoin futures product launched in May, with the company reporting on Thursday that it had traded more than 3.3 million contracts.

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