Record High Reached by CME Bitcoin Futures, Uncertainty Lingers Above $36K

The Chicago Mercantile Exchange (CME) saw its Bitcoin (BTC) futures open interest reach a new peak of $3.65 billion on November 1. This figure takes into account the value of each contract in circulation for the rest of the year, with buyers (longs) and sellers (shorts) being constantly matched.

Bullish Momentum on CME Bitcoin Futures, but Cautious BTC Options Markets

The number of active large holders of Bitcoin surged to a record 122 during the week of Oct. 31, indicating a growing institutional interest in the crypto currency. Notably, the Bitcoin CME futures premium reached its highest level in over two years, which is much higher than the 5% to 10% range seen in neutral markets.

This strong demand for long positions raises concerns that some investors may be relying on the approval of a spot Bitcoin exchange-traded futures (ETF). However, evidence from Bitcoin options markets suggests a growing demand for protective put options, as the put-to-call open interest ratio at the Deribit exchange reached its highest levels in over six months.

The current 1.0 level signifies an equal balance between call (buy) and put (sell) options. However, it is worth noting that investors could have sold the call option, gaining positive exposure to Bitcoin above a specific price.

Regardless of demand in the derivatives market, Bitcoin’s price is ultimately determined by spot exchange flows. For instance, the rejection at $36,000 on Nov. 2 caused a 5% correction, bringing the price down to $34,130. Interestingly, the Bitfinex exchange experienced daily net BTC inflows of $300 million during this movement.

As analyst James Straten highlighted, the whale deposit coincided with the fading momentum of Bitcoin, suggesting a potential connection between these movements. However, the downturn did not breach the $34,000 support level, indicating real buyers at that celsius crypto latest.

Bitcoin’s latest correction occurred while the Russell 2000 Index futures, measuring mid-cap companies in the U.S., gained 2.5% and reached a two-week high. This suggests that Bitcoin’s movement was unrelated to the U.S. Federal Reserve’s decision to maintain interest rates at 5.25%.

Additionally, the price of gold remained stable at around $1,985 between Nov. 1 and Nov. 3, demonstrating that the world’s largest store of value was not affected by the monetary policy announcement. The question remains: how much selling pressure do Bitcoin sellers at $36,000 still hold?

Reduced Bitcoin availability on exchanges can be deceiving

As evidenced by the $300 million daily inflow to Bitfinex, evaluating current deposits on exchanges alone does not give an accurate representation of potential sale availability in the near future. A lower number of deposited coins may point to a lack of confidence in these exchanges.

Apart from Coinbase and Binance being targeted by the U.S. SEC for unlicensed brokerage operations, the FTX-Alameda Research incident has caused further apprehension among investors. Recently, U.S. Senator Cynthia Lummis urged the Justice Department to take “swift action” against Binance and Tether for their involvement in providing funds for terrorist organizations.

The cryptocurrency market has also been influenced by increased returns from traditional fiat fixed income operations, while the once lucrative cryptocurrency yields vanished following the Luna-TerraUSD crash in May 2022. This shift has had lasting effects on the lending sector, resulting in the collapse of BlockFi, Voyager, and Celsius.

At present, there is an undeniable increase in institutional demand for Bitcoin derivatives, according to CME futures data. However, this may not be directly related to lower spot availability, making it difficult to predict the supply between $36,000 and $40,000—a level which hasn’t been tested since April 2022.