Institutions Making Large Bitcoin Purchases and Driving the Price Up as CME Futures Premium Surges to April Level


Bitcoin is comfortably trading around $54,000 after breaking above $50k earlier this week. According to Glassnode, more than 93.5% of circulating BTC are currently in profit at this price.

Interestingly it’s not just retail and the cryptocurrency industry that is getting excited about Bitcoin yet again. In fact, institutional investors at the regulated derivatives platform Chicago Mercantile Exchange (CME) are particularly driving the price action.

Bitcoin futures contracts are actually trading at an annualized premium of 12.8% to the spot price, the highest level since mid-April. Usually, Deribit has the highest basis and CME the lowest, but now the latter has exceeded Deribit’s, “implying large futures purchases on CME,” said Delphi Digital.

Additionally, just a week ago, the futures contracts were trading at a discount of 0.36%.

The increase in premium “suggests that there is high demand among the CME traders to build long exposure in bitcoin at the moment,” wrote Arcane Research in its weekly research note published Tuesday.

“The front-month contract on CME is by far the most frequently traded BTC futures contract on the exchange, and right now, bullish tendencies seem to be brewing on the institutional platform.”

On CME, a Bitcoin futures contract consists of 5 units of BTC. On Tuesday, when the BTC’s price finally went past $50k, the CME share of Bitcoin volume also hit an all-time high.

In terms of open interest, CME has risen to the second spot after going past $3 billion, just a spot behind Binance, which is recording $4.12 billion in OI, as per Skew. OI on CME actually rose pretty fast as on Sept. 29, a week back, it was standing at a mere $1.47 billion, according to Bybt.

“This shows how the market is trading a futures based bitcoin ETF as theme,” commented trader and economist Alex Kruger.

This intensified trading on CME is primarily in response to the high expectations for the US to approve a futures-based Bitcoin exchange-traded fund (ETF) as soon as next month.

As we reported, SEC Chair Gary Gensler has signaled his openness to a futures-based ETF on two occasions, increasing the hopes for getting approval for the same product before the year is over. Since Gensler’s positive comments, several firms have applied for such an ETF.

According to Eric Balchunas, Bloomberg Intelligence senior ETF analyst, there is a 75% chance of a Bitcoin Futures ETF approval this month, most likely the ProShares Bitcoin Strategy ETF on Oct. 18. ETF Store President Nate Geraci also sees the first US-listed futures ETF to be approved in two weeks.

Such approval would only lead to further buying pressure on CME bitcoin contracts resulting in a higher premium because the ETF would gain exposure to Bitcoin via CME-traded futures, as Gensler has said.

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