Bitcoin Futures Trading at a High Premium; Already Hitting $12,000 on CME
Bitcoin has yet again gained momentum, with people expecting for $12k to hit soon. According to analyst Mati Greenspan, for a sustainable rally, a small retracement before we blast through $12,000 would be good for the largest digital currency.
“But judging by the current temperature, I'm not even sure a cooldown period is possible,” he said in his daily Quantum Economics email.
However, bitcoin has already jumped the $12,000 resistance on CME Group. Yesterday while people were awaiting $12k, BTC futures went as high as $12,100 before dropping back under $12k level.
The positive thing is while the spot price is around $11,780, CME Bitcoin futures are trading at $11,955, at a premium of nearly 1.5%.
The futures premium has been soaring since last week amidst the bitcoin rally, a trend which is continuing this week as well while the digital asset continues to rise further.
When it comes to September contracts, CME bitcoin futures contracts are trading at even a larger premium than the retail exchanges. The September premium has increased from 2.05% to 2.76% over the last week, as per Arcane Research. Denis Vinokourov of Bequant noted,
“The futures term structure remained in deep contango, suggesting risk appetite is aplenty, and this demand for leverage has been particularly evident in the lending market, where traders were seeking to borrow fiat versus crypto holdings to maximise basis trading strategies.”
The premium rates at retail exchanges have also been rising during this period, indicating strong bullish sentiments. At the time of writing, BTC was trading at $11,800 on Bitfinex, $11,824 on Coinbase, and $11,831 on Bitstamp and Gemini.
Increasing institutional demand
As bitcoin started rallying last week, the futures market saw a sudden increase in its funding rates, a tool to reassure the price of the perpetual swap is kept close to the underlying asset. The funding turns positive when the perpetual contract is trading above the BTC spot price, which has long trades paying a fee while short trades received a rebate.
The funding rates soared this week, on Binance they peaked at 0.14% as “investors sought to get leveraged exposure to the upside,” only to fall back to near normal state at 0.021%. The crypto data provider states,
“This is a healthy sign in the market, as it indicates that the market is stabilizing, and the leveraged longs are on a decline.”
Besides all this, trading volume is also enjoying a surge. Bakkt had its moment when it hit a new all-time high of $132 million, 200% higher than the old record signaling a shift in institutional sentiment to bitcoin exposure after it broke $10,000.
The total open interest on Bakkt futures jumped to $24 million last week, a spike of 550% from the lows on July 16th. This week, it has further grown to $26 million.
CME’s OI has been having even more eventful days as it reaches $830 million, currently holding 16.8% of the total open interest in the BTC futures market, a record high dominance for CME — a clear indication of increasing institutional demand for bitcoin.