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Open interest for CME bitcoin futures hits 830 million signs of an upward trend

August 7, 2020

The price of bitcoin (BTC) has been in a pretty strong uptrend since mid-March when price bounced back from the massive collapse that saw the price drop to $ 3,600 on some exchanges..

Regardless of whether you are tracking the price on a 3-hour chart or on a weekly timeframe, the price has risen steadily and culminated in a test of UDS 12,100 on August 2nd.

Technically, There has been no lower lows since the two-day 50% collapse where the price test tested the level below $ 4,000.

Open interest for CME bitcoin futures hits 830 million signs of an upward trendOpen interest for CME bitcoin futures hits 830 million signs of an upward trend

Bitcoin USD 3-day chart

Bitcoin / USD 3-day chart. Source: Skew

Longer-term movements are sometimes difficult to spot as the human mind pays more attention to recent or traumatic events.

Some traders may have interpreted the agonizing 87 days it took to finally break the USD 10,000 resistance as a negative experience considering it was a bear market.

Traders who have focused on altcoins will celebrate the current “alt season” regardless of the overall performance of the crypto markets, and there is nothing wrong with that either.. The only possible downside is that Bitcoin and Ether (ETH) trends will reverse when large traders turn bearish, resulting in an exponential drop in the price of altcoins.

Large traders have trimmed long positions but remain bullish

The data provided by the exchanges highlighting traders’ net long-to-short positioning can be used to determine whether the pros are bullish or bearish.

Although there are discrepancies in methodology, the changes in this index provide a reasonably clear view of the major traders’ net exposure.

Top trader longs / shorts

Long / short of the best traders. Source: Binance, OKEx and Cointelegraph

Binance and OKEx data were relatively neutral through July 26, and large traders have had long-term net exposure since then. Not even the sharp drop in Bitcoin prices of $ 1,500 on August 2nd could undermine the optimism of these traders.

Derivatives indicators for trading Bitcoin futures and options also remained very bullish despite $ 1 billion sell-offs on Sunday, according to Cointelegraph.

The volume remains strong

After reaching the maximum price level, the volumes tend to generally decline. This doesn’t necessarily lead to a bearish mood and often occurs in cycles of accumulation.

Due to some excessive number swaps, analyzing absolute numbers is not very useful. However, changes in volume provide information about rising and falling activity, especially after sharp price movements.

Bitcoin futures aggregate the trading volume

Aggregate trading volume of Bitcoin futures. Source: trade view

Although it remains to be seen whether recent total market capitalization will maintain the $ 350 billion level, The recent increase in the average volume is an indicator of a healthy market trend.

Even if this volume subsides, it shouldn’t be a problem as long as it doesn’t drop below the previous month’s level.

Institutional investing remains strong

In contrast to volume data The open interest in futures contracts provides a better picture of the overall risk of investors.

Regardless of your trading activity, which may stall temporarily after price shocks, open interest remains high as long as players keep their positions open.

In order to be able to better assess the business flow, the data from the Chicago Mercantile Exchange (CME) should be analyzed in isolation.

CME bitcoin futures open interest

Bitcoin futures open interest on CME. Source: Skew

The growing open interest in CME futures suggests growing institutional activity. As shown above, The indicator reached its historic high of USD 828 million on August 3, more than twice as high as the previous month.

Derivatives confirm the main traders’ optimism

Derivative indicators such as contango (basis), financing rate, 25% delta bias options and put / call ratio clearly indicate an upward trend.

While there is no single indicator or analysis that offers security for short-term price movements, the net exposure of large traders and the growing appetites of institutional investors suggest an undeniable upward momentum.

When in doubt, traders with daily and 3-day charts should take a step back instead of focusing on smaller time frames and ultimately being run over by larger and more aggressive trends.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement is associated with risks. You should do your own research when making a decision.

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