Institutions Take Record Bullish Bets in Bitcoin Futures, Shrugging Off Exchange Missteps

Institutions recently raised their bullish bets in bitcoin BTC$92,087.48 futures listed on the Chicago Mercantile Exchange (CME) to the record level set last month amid signs of market maturity.

• In the week ended Oct. 13, institutional investors increased long positions by over 9%, taking the tally of bullish bets to the record high of 3,500 contracts reached in mid-September.
• The numbers were revealed by the Commitment of Traders (COT) report published by the U.S. Commodity Futures Trading Commission (CFTC) on Friday.
• The cryptocurrency's price reached multi-week highs above $11,700 during the seven days to Oct. 1, confirming a breakout on technical charts.

• BTC's recent resilience to several exchange-related issues may have given institutions the confidence to increase their bullish bets.
• The cryptocurrency remained largely bid above $10,000 earlier this month despite news of the KuCoin exchange hack and U.S. regulators bringing criminal and civil charges against BitMEX.
• Similarly, buyers defended support at $11,200 on Friday after prominent crypto exchange OKEx suspended withdrawals.
• "Had these events happened last year, the [bearish] impact on bitcoin's price would have been much greater," Sui Chung, CEO of CF Benchmarks, said in a statement to CoinDesk.
• The derivatives market is now less dependent on exchanges like BitMEX and OKEx than a year ago.
• In September 2019, the two exchanges accounted for over 70% of the global BTC derivatives' open interest. That number has now dropped to 40%.
• As such, the cryptocurrency is less sensitive to exchange-related issues. That's a testament to the growing maturity of the cryptocurrency space, according to Chung.

Are speculators bearish?

• Speculators or leveraged funds – hedge funds and various types of money managers that, in effect, borrow money to trade – increased their short positions by 4% to 14,100 – the record low seen in August.
• That does not necessarily imply bearish implications for price.
• According to Patrick Heusser, a senior cryptocurrency trader at Zurich-based Crypto Broker AG, cash and carry trading may have pushed bearish bets to record highs.
• "Cash and carry" is an arbitrage strategy that involves buying the asset on the spot market and taking a sell position in the futures market when the latter is trading at a significant premium to the spot price.
• Futures prices converge with spot prices on the day of the expiry, yielding a risk-free return to a carry trader.

Also read: Bitcoin Price Dips 3% on OKEx News, Analysts Aren’t Too Worried