Open Interest On Binance Bitcoin Futures Soaring While New Money Is On Its Way
Cryptocurrency prices recovered sharply from Tuesday’s losses; however, the market hasn’t come out of the woods yet.
Currently, around $33,000, Bitcoin remains trapped within the range of the mid-$30,000s while Eth is trading near $1,900.
While “The Big Short” investor Michael Burry continues to call for the mother of all crashes for crypto with his latest tweet reading, “Trapped bulls often fall for the latest support,” there is still a lot of dry powder sitting on the sidelines and tons of new money flowing in the private crypto market.
Following the latest sell-off this week, open interest in BTC terms has also increased on the leading exchange.
“We're seeing unprecedented pace of open interest growth on Binance,” noted trader CL of eGirl Capital. At the time, on Tuesday, CL reported OI at 57,000 BTC “at an all time high,” which has now surged to 81,200 BTC, an increase of 42% in just two days.
Everyone says crypto is done-zo, I’ve even been rather negative
But with the amount of capital raises going on right now idk….. something is up
We’re seeing tens, hundreds of millions poured in across the space seemingly weekly at this point
— BIG DOG (@MoonOverlord) June 23, 2021
According to trader and economist Alex Kruger, the scenario presented by Burry can happen and is one of the reasons why holders and funds have been selling so much lately and stablecoin balances on the sidelines are so large.
“Look at the market, it is rather dead. Yesterday ended up as a simple short squeeze,” he said.
But for Bitcoin to break down hard, “it would likely need to first get bulled up, let longs lever up,” he said, pointing to the breakdowns of support in September 2019 and November 2018. In both those cases, funding prior to the break was very positive while currently is negative.
Funding has been consistently negative since May 19, when the first breakdown occurred with bulls scared & hedged.
According to trader CL, however, it is likely if we pump, we will continue to see negative funding because “current positioning ppl are just gana fomo more.”
if we start mooning hard I think perp funding will remain flat / negative for a while.
I can't count how many whales I know that sold their spot coins to buy cheap perps or sept futures as exposure, that will be ready to unwind that back by buying spot and selling futures
— CL (@CL207) June 23, 2021
“Fundamentals are healthy, and there is too much negativity priced in,” said Felix Dian, who runs a crypto-focused fund at MVPQ Capital in London. “Derivatives data, including backwardation in futures, tell us that there is a strong short base at the moment, making any leg lower unlikely to be durable as shorts get squeezed.”
A major string of negative headlines — ESG concerns, China FUD, and Federal Reserve discussing tapering — meanwhile “would bypass the need of positioning tilted to the long side.”
While China’s FUD is expected to subside after the politically sensitive 100th anniversary of the ruling communist party on July 1, Grayscale Bitcoin Trust (GBTC) discount has been shrinking, with the unlocks coming to an end next month as well.
one thing we haven't discussed yet – the grayscale $GBTC unlock schedule is looking really crusty
from mid-april to mid-june, 139,000 bitcoin worth of shares have unlocked. there's another 140,000 bitcoin worth of shares that will unlock through the end of july
— Meltem Demir◎rs (@Melt_Dem) June 23, 2021
A lot of cash is also now sitting on the sidelines, with stablecoin balances continuing to go up. Total stablecoin supply has gone past $100 bln, adding nearly $50 billion in just the last three months.
Unlike the last cycles, this time, traders and investors can simply make a shift to stablecoins, which could help the bear market be a shorter one. Fiskantes noted,
“Money don't have a reason to leave if they can stay in stables -> compressed yields -> higher yield seekers increase risk appetite -> buy pressure for “productive assets.”
However, it is also possible institutions are going for yield directly instead of buying cryptos.
the rate of USDC minting concerns me, the more money seeking yield in crypto, the more alpha decay in futures curve
the pool of yield seeking money only get bigger
leverage traders seem to perpetually lose money
1 day we might never see quarterlies above 20% again
— CL (@CL207) June 23, 2021
While crypto natives have been hedging while having considerable ammunition to buy the dip, Kruger noted that there’s also new money on its way.
He pointed to PWC’s May 2021 survey, which found that 21% of hedge funds are investing in crypto, over 85% of those funds intend to deploy more capital by EOY, and 26% of funds not yet investing in crypto are in late-stage planning to invest or looking to.