Tag: cme

CME Group Bullish on Bitcoin Despite Pullback in Prices

The Chicago Mercantile Exchange (CME) Group recently stated that customer interest in CME Bitcoin futures remained bullish in Q3 2019 despite the Bitcoin price pullback.  

In a tweet shared by the CME Group showed that due to the strong institutional investor demand in CME Bitcoin futures in Q3 2019, with daily open interest of over 4,629 contracts, which has increased 61% compared to Q3 2018. Despite the 25% drop in Bitcoin price this quarter, the open interest in the CME’s contracts was down only 1% from Q2 levels in 2019. 

According to the exchange, the average daily volume of contracts during Q2 2019 was 5,534, which was a 10% increase from Q2 2018, totaling 27,670 Bitcoin, equivalent of $289 million. CME said:  

“Institutional flow remained strong, with 454 new accounts added, compared with 231 added in the third quarter of 2018.”  

50% of the CME’s Bitcoin-futures trading volume in Q3 was outside the US, with 26% from the Asia Pacific region and 21% from Europe and the Middle East.  

The CME Group is now facing new competition from Bakkt, by the Intercontinental Exchange (ICE) which launched its Bitcoin-futures contract in September this year, to allow institutional investors who might want to invest in cryptocurrency.  

Image via Bloomberg News

JPMorgan Reveals Market is Highly Anticipating the Launch of CME Bitcoin Options

According to JPMorgan Chase & Co, Institutional interest in Bitcoin-related contracts appears to be building, and they believe the market is in high anticipation of the CME Group Inc. options, which are to be launched on Jan. 13.Recently we have seen institutions such as Bakkt, subsidiary of the New York Stock Exchange and its parent Intercontinental Exchange Inc., start offering options last month but according to strategist Nikolaos Panigirtzoglou in a note on Jan 10., volumes and open interest haven’t met the expected mark. However he expects with the dominance of CME in trading Bitcoin futures on regulated exchanges, this new offering may change things, as reported by Bloomberg.

“There has been a step increase in the activity of the underlying CME futures contract.” Panigirtzoglou had noted in his writing that open interest had seen a 69% increase from the end of the year and that the number of large interest holders had increased. “This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”

The price of Bitcoin has always caused the price movement of Bitcoin to have a mixed reaction. There were times it had appeared to have dragged, such as when ICE announced the debut of its new futures contracts in September. And the price climaxed to $19000 in December 2017 following the launch of the futures for CME and Cboe Global Markets Inc.

The price of Bitcoin saw a 2.1% increase to $8,209.42 as of 11 a.m. in Hong Kong, according to Bitstamp pricing: this was near its highest levels since mid-November. According to the report, the intrinsic value of Bitcoin has been on the increase but remains below the market price. JPMorgan calculates the intrinsic value of Bitcoin by treating it as a commodity, considerations such as the marginal cost of production, the computational power and the cost of electricity used are key elements.

Panigirtzoglou stated in his writing, “The market price has declined by nearly 40% from its peak while the intrinsic value has risen by around 10%,”. But that “the gap has not yet fully closed, suggesting some downside risk remains.”

Image via Shutterstock

CME to Close Trading Floor on Friday as Coronavirus Prevention Measure

CME Group plans to close its trading floor in Chicago due to fears of further spreading the coronavirus, the influenza outbreak that has sent global stock markets falling.

As reported by CNBC on March 10, CME Group will close its Chicago trading floor at the end of the day on Friday. The derivatives exchange, which was also the first traditional financial insitution to offer Bitcoin Futures trading, has cited coronavirus prevention measures for the disruption.

This would make CME the first major U.S. exchange to close a trading floor due to concerns over the coronavirus citing an internal memo which said, “No coronavirus cases have been reported on the trading floor or in the Chicago Board of Trade building. The reopening of the trading floor will be evaluated as more medical guidance on the coronavirus becomes available.”

Coronavirus Disruption

Since the first patient was identified on Dec. 1, 2019, in Wuhan, China, the scourge of the coronavirus has led to the temporary closure of factories in China with the electronic industry supply chain being hit the hardest forcing an extension in the Lunar year holiday following the outbreak of the virus.

Despite quarantine and several measures being actively employed to halt the spread of the virus in China, the outlook continues to look bleak for Chinese manufacturers as the year 2020 continues to evolve.

Factories in China are showing their concern about how the situation of the virus could cause a drastic effect on their company. Andre Neumann-Loreck, founder of On-Tap Consulting, a Silicon Valley firm offering advice to hardware companies and startups building products in Asia said, “Clients are making lots of inquiries on ways to address the epidemic.” The effect of the virus is showing huge strain on companies who build hardware or physical products irrespective of the goods being built in China or reliance on China for components and sub-assemblies to finish the products.

Image via Shutterstock

Bitcoin Analyst: Bitcoin Futures Do Not Manipulate Bitcoin Price In Spot Market

According to a Bitcoin analyst, PlanB, creator of one of the most accurate Bitcoin price models, on April 7, 2020, claimed that Bitcoin Futures do not affect the price of Bitcoin in the spot market. In his tweet, he said that Bitcoin prices stayed within the S2F bands even when Bitcoin was at its all-time-high (ATH) in December 2017 which many people claim was suppressed by the introduction of Bitcoin Futures in Chicago Mercantile Exchange (CME) in 2017. 

He went on to say that Bitcoin performed as expected even after the Bitcoin Futures had hit the market in 2017. The reason to clear the air and the link between Bitcoin and Bitcoin Futures is because many people in the crypto community have started speculating a pattern in the Bitcoin price drops which is coinciding with the settlement dates of Bitcoin Futures. 

“Absolutely! Real Bitcoin is something completely different than paper bitcoin. Real bitcoin is a bearer asset that can be used as collateral (e.g. for borrowing), paper bitcoin is an IOU like debt and your bank account (it’s yours until it isn’t,” said PlanB. 

According to PlanB, the Bitcoin price is a function of the interaction between the miners who pump in the ‘new’ bitcoin in the system and the already circulating Bitcoins in the market. He made a model on the basis of this function and it has been extremely efficient. However, the model still faces criticism from many industry experts. 

One of the twitter users, Josh Kernan, cited a research report from the Federal Reserve Bank of San Francisco which claimed a direct connection between Bitcoin price and the Bitcoin Futures. 

But PlanB was quick to respond that the study is now irrelevant as the data used in the report was of just 5 months. The report was published on May 7, 2018, soon after which the Bitcoin Futures market went into contango and is staying there ever since.  

  

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May 7: The Traders' War… New vs Seasoned…

Trading Crypto with Eugene is a series of daily commentary of market analysis and trading advice shared by Eugene Ng of Matrixport, a veteran trader with 10 years of experience in top-tier global investment banks. If you like the article, please follow us here on Blockchain.News so you won’t miss our future publications.

 
Bitcoin is now up close to 3% past 24 hours as it spiked through $9400 for a bit even as U.S. equities traded poorly, leaving me with the thesis that BTC is starting to break away from moving in lockstep with S&P 500 until and after the halving event. In fact, the 1-year rolling correlation between Gold and Bitcoin is nearing all-time high, so we could start seeing it behave more like Digital Gold. CME-listed Bitcoin’s open interest rose to almost $400 million yesterday, an all-time high. What does that mean? It basically signals that U.S. regulated institutions and retail (through their TD Ameritrade accounts) are pouring fresh capital into these futures contracts. Further evidence that retail is buying is that spot exchanges (i.e. Coinbase) generally show accelerated volumes while futures are not moving much. For example, neither the futures curve has steepened that much nor the term structure basis. Second, Square reported tremendous growth in Bitcoin purchases through their app.
We got the bull case. So what’s the bear case? The bear case is that the % of open interest of CME vs the global open interest of all exchanges is 15%, which isn’t exactly large. So we know the U.S. regulated traders and retail are in the recent fresh bulls vs leveraged and long-time/seasoned traders sitting on the sidelines. I wrote in my earlier notes that two reasons that may be holding leveraged and longtime traders back are as follows; (1) past two halvings were met with decline in BTC’s price post-event, (2) fresh memories of 12-March crash. Trade strategy this week? Stick to the same game plan; for those who heeded my advice in the past few notes on going long volatility through buying BTC calls, that has worked quite alright. In fact, a large player lifted 10,000 ETH 250 June calls yesterday. I would also start building some put positions if we do see BTC breaking higher to $10k or beyond. Gdluck and peace out. All-time high in CME’s listed Bitcoin futures open interest… U.S. regulated traders and retail are starting to build fresh positions, and likely are from the long side….

Rolling 1-year correlation between Gold and Bitcoin near all-time high…. Bitcoin back becoming digital gold?

$9,500 still an all-important key short-term level. Will the bulls be strong enough to break $9,500 today?

Bitcoin Dominance edging higher, 69% will be a key level, so looks like we still have further room in BTC outperformance in the digital assets space…

 

DisclaimerOpinions expressed are solely the analyst’s own and do not express the views of Matrixport the company.The views and opinions expressed in this article are those of the contributor and do not necessarily reflect the view of Blockchain.News.

Paul Tudor Jones' Bet on Bitcoin Supported by CME’s Bitcoin Futures CFTC Data and PwC’s Latest Crypto Report

Paul Tudor Jones: The Great Monetary Inflation

Billionaire hedge fund manager Paul Tudor Jones was reportedly looking to buy Bitcoin to hedge against inflation as central banks across the world are printing money to relieve economies affected by the coronavirus pandemic. Jones is one of Wall Street’s most seasoned and successful hedge fund managers, CEO and founder of Tudor Investment Corp, a hedge fund that managed $8.4 billion assets under management as of March 30, based on data from the Securities and Exchange Commission.

Jones compared Bitcoin to gold by saying that the digital currency reminds him of the role that gold played in the 1970s. Jones was well known for his correct prediction of the 1987 market crash and shorted Japanese equities several years later before Japan’s economy crashed. 

Jones said in an investor letter, called The Great Monetary Inflation, “The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be Bitcoin.” As money-printing will push traditional investors to gold, he believes that the world will then “crave new safe assets,” which may be beneficial to Bitcoin. He added, “Quite often, how the markets respond will be at odds with your priors. But remember, the P&L always wins in the long run. With that in mind, in a world that craves new safe assets, there may be a growing role for Bitcoin.”

Last week, Arthur Hayes, CEO of one of the world’s largest crypto exchanges, BitMEX tweeted that Jones has made the right move to invest in cryptocurrencies such as Bitcoin, and has removed career risks by doing so.

PwC’s latest crypto hedge fund report

In an annual report by Elwood Asset Management and consulting firm PricewaterhouseCoopers (PwC), the value of assets under management at cryptocurrency hedge funds has soared to $2 billion, doubling the value in 2019.

With over 50 funds surveyed, most crypto hedge funds trade Bitcoin (97%), and Ethereum was the next most popular crypto (67%). Around half of the crypto hedge funds trade derivatives or were active short sellers. 

The coronavirus pandemic has led to an inquiry of how hedge fund managers reduce counterparty risks, as the use of independent custodians has also surged from 51 percent in 2019 to 81 percent in Q1 of 2020. Henri Arslanian, the co-author, and PwC Global Crypto Leader said, “The changes the crypto hedge fund industry has seen in the past 12 months, from additional regulatory clarity to the accelerated implementation of best practices are great examples of how fast the industry is becoming increasingly institutionalized.” 

The report also highlighted that of the 150 active crypto hedge funds around, about 63 percent were launched in 2018 or 2019. The launch of the actively managed crypto funds is also highly correlated with the price of Bitcoin. As the price of Bitcoin surged exponentially in 2018, it became a breeding ground for new crypto funds. There was also a correlation observed at the end of 2019, as Bitcoin faced a bear market, there was also a decline in new fund launches. 

According to CFTC data, CME Group Bitcoin futures saw a record number of large open interest holders this week, at 66. Long open interest from hedge funds trading Bitcoin futures also high an eight-month high, reaching over $15 million on May 5. 

May 15: The Year of Bitcoin Options?

Trading Crypto with Eugene is a series of daily commentary of market analysis and trading advice shared by Eugene Ng of Matrixport, a veteran trader with 10 years of experience in top-tier global investment banks. If you like the article, please follow us here on Blockchain.News so you won’t miss our future publications.

Happy Friday! BTC up 3% in the past 24 hours, flirting $9,900, teasing the market at the $10K psychological level. In the last few days, I noticed BTC’s weakness from the start of Asia session followed by buying activity when the U.S. woke up, driven primarily by spot buying (futures curve still relatively flat). This is why I suspect that U.S. capital is driving the current bid; both retail and institutions. You would notice that CME listed BTC futures have been trading at a 50-75 bps premium recently.

Another sign of U.S. or regulated capital coming into this space is that the total BTC options open interest made a new record of almost $1.3bn yesterday, the result of substantial increase of activity in CME. Yesterday marked the third consecutive record volume day for CME options; concentrated mostly on calls; $10k, $10.5k and $11k across both May and June tenors. 

The last reason why I think fresh capital is being invested is that we are starting to see the breakdown in correlation between BTC and S&P. While this correlation tends to flip flop, the current weakness in correlation is also testimony that there is fresh money coming into the space defying the gravity of S&P weakness. 

 
Trade Strategy: In the short term, I’m not chasing here as I think bears have an edge technically speaking. Having said that, I will be bidding between $7,800 to $8,000 which is around the key 200 DMA. Another way to buy BTC is to sell puts (i.e. wait for BTC to settle while harvesting your USD stable collateral at high double-digit % yield) which coincide with my current vol outlook that is to short volatility. For example, the BTC 8,000 put is yielding 30+% for 7 days. I hope you are enjoying my market musing so far and have a restful weekend with your family. 
 
Technically speaking, we are making lower highs on the 4-hour chart… Let’s not forget we are still in the medium-term upward trending market as long as $7,800 holds…. 

 
Record $1.3bn of BTC options open interest. Increased sophistication, more venues, and new entrants… 2020 may mark the year of hyper-growth in BTC options…

The third consecutive record volume day for CME options… Institutions are coming…

CME BTC Options Open Interest… You can see the regulated institutional players are all bullish at 10k/10.5k/11k… 

 

Disclaimer
Opinions expressed are solely the analyst’s own and do not express the views of Matrixport the company.
The views and opinions expressed in this article are those of the contributor and do not necessarily reflect the view of Blockchain.News.

A Billion Dollars in Bitcoin Options Expired, Bitcoin may be Vulnerable to Violent Price Moves

A billion dollars worth of Bitcoin options are to expire in June, in the meantime, traders are debating whether this will result in higher volatility, and the direction of which Bitcoin price is headed. Traders must decide whether to take their options or leave.

Around 114,000 options from Bitcoin’s regulated and unregulated derivatives markets are set to expire, traders will need to decide whether to sell, buy, or to cast aside the options they have previously made to trade Bitcoin.

Bitcoin options, similar to other traditional options markets, is a derivative which allows the traders to purchase an asset at a pre-specified price at a later date, giving traders the opportunity to “place a bet” on the asset.

Bitcoin options recorded a strong start for 2020. Deribit, an unregulated Bitcoin derivatives exchange has seen a rise in popularity this year, as it holds $1.2 billion in Bitcoin options contracts. On January 13, CME launched Bitcoin options on its derivatives exchange. On that day CME traded around 55 contracts worth around $2.1 million of Bitcoin, while Bakkt peaked at $1.15 million in Bitcoin option trading volume. Despite the hype of these new regulated exchanges, Deribit still managed to dominate 80% of the trading volume.

CME exchange, the next biggest holder in Bitcoin options currently has $441 million in outstanding options trades, according to derivatives research firm Skew.

The expiry of options may influence market direction heading towards the Bitcoin bull or bear market during a process known as “pinning,” where options traders try to move the spot price to avoid huge losses. Currently, open interest is concentrated at $10,000 and $11,000 strike prices, at which the price levels traders buy. Strike prices expire a few months after the trader places the bet.

According to CFTC data in May, CME Group Bitcoin futures saw a record number of large open interest holders this week, at 66. Long open interest from hedge funds trading Bitcoin futures also high an eight-month high, reaching over $15 million on May 5.

What happens after the Bitcoin options expire?

If traders rollover short positions in June contracts to July and September, Bitcoin may see high volatility in prices in the coming months. A rollover means buying an underlying asset and taking the opposite position in the same contract, nearing the expiry date, and replicating the same strategy in the next closest expiry.

Bitcoin has seen a prolonged period of low volatility in the past few months, which means it could mean a high possibility of a big move in either direction. While many may not find volatility in Bitcoin price exciting, it has a positive impact on option prices; as traders usually sell options when volatility is above its lifetime average, and purchase options when volatility is low. 

Although the Bitcoin options market only takes up 1% of total futures and swap volumes, there is a substantial open interest of 4,605 contracts in CME futures worth $214 million at press time expiring in June; which is yet to be seen to be rolled over to July. 

Jul 30 Trading Analysis: The Running of the BTC Bulls

Trading Crypto with Eugene is a series of daily commentary of market analysis and trading advice shared by Eugene Ng of Matrixport, a veteran trader with 10 years of experience in top-tier global investment banks. If you like the article, please follow us here on Blockchain.News so you won’t miss our future publications.

BTC trading resiliently around the $11k mark with open interest across global exchanges hitting $5 billion, a level not seen since February this year. This move has been driven mostly by leveraged and arbitrage community who are executing their favourite cash and carry trades (see chart below on elevated perpetual funding). But really this bull run has been ignited from the U.S. on Monday evening with regulated exchanges CME and Baktt registered record volume days. With the robust volume across most venues, price action has also been healthy for the bulls as the pull backs have been brief. BTC options open interest also hit a new all-time high of almost $2bn in notional value. Precious metals breaking out have also been commonly highlighted as another driver too.

Overnight, no surprises from the U.S. Fed who left interest rates near zero and vowed to use all its tools to support the recovery from an economic downturn that Chair Powell called the most severe “in our lifetime.” More worrying, U.S. coronavirus death toll topped 150K, the highest official toll in the world and a grim milestone in a pandemic that is still raging in some states such as Texas, Florida and California all reported record daily fatalities. But hey, for day traders and trading junkies, today’s gonna be lit for earnings as we’ve got our favourite four tech giants who make up 40% of Nasdaq market cap report earnings. This should be fun. Trade strategy: Think we have got some momentum going as rotation from DeFi and precious metals investors as well as even day traders from the U.S. (think Robhinhood). Having said that, I am always the kind who believe in taking your profits. It is not your profits until you take them. So with volatility now a 1-month high, I think it is quite attractive to scale into “take profit” with short BTC call positions as an overlay. For example the 8-day BTC 12.5k call is yielding at 21% annualized interest, 8-day ETH 350 call is yielding at 35% annualized interest. 

Levels to take profit or chase? Here you go! Check out this massive breakout chart on the weeklies! 

 

 
CME futures had the most active session on Monday, 1.3bn traded… Open Interest also climbing to a record high….

Second consecutive record session on Bakkt yesterday, interesting that people are now keen on physically settled contracts…
 

 
USD Cash and carry trade back in fashion, over 20% annualized, juicy huh?

 

Correlation between ETH and BTC breaking down with BTC powering ahead… Correlations tend to be low in bull markets and high during downtrending markets…
 

Will CME's Ethereum Futures Launch Send Ether Price Higher?

Ether has been in a short-term downward trend ever since the crypto hit its ATH on the weekend and is now trading just above the $1600 support level. With the launch of CME’s Ethereum futures contracts imminent, what can we expect from the Ether price?

Ethereum’s price has been grabbing headlines after Ether hit a new all-time high (ATH) over $1700 and the imminent launch of CME Ethereum futures contracts.

Ethereum, the second-largest cryptocurrency by market value after Bitcoin has seen its native crypto Ether’s price soar by more than 25% this week to record highs above $1,760.

Ethereum Institutional Interest

Ethereum is finding more institutional interest than ever before and on Feb. 8 exchange operator CME group will launch its first Ethereum futures contract on another offering in the crypto market alongside its bitcoin futures and options.

Grayscale Investment has also reopened its Grayscale Ethereum Trust, after having closed the fund to new investors in late December. In this week alone, the trust has seen inflows of nearly 100,000 ETH. Grayscale now manages nearly $5 billion in Ethereum.

JPMorgan Analyst’s estimate that the CME’s Ethereum futures initial volumes are likely to be low. Lead analyst Nikolaos Panigirtzoglou said last week:

“The listing of CME bitcoin futures coincided with all-time highs in bitcoin prices, and researchers at the San Francisco Fed suggested that, by providing a market where bearish positions could be more readily expressed, the listing of these futures contributed to the reversal of bitcoin price dynamics […] In a similar vein, it may be that this week’s listing of Ethereum futures contracts will be followed by negative price dynamics by enabling some holders of physical Ethereum to hedge their exposures.”

Ether Price Analysis

Source: ETH/USD TradingView

Ethereum’s daily chart shows that Ether’s price is currently moving in an upward channel and is currently fluctuating within this channel. There is currently no sign that the Ether price will break through the upper-pressure line—although the recent closing price is above the 9 day Moving Average (MA) however from the perspective of trading volume, it is currently in a low volume area.

The 9 MA has turned into a support line. The chart indicates the  price will test the strength of 9-MA support level. If Ether’s price closes below the 9-MA line, it will then move to test the upward channel. The support line is currently in a short-term downtrend. Investors need to pay close attention to whether the daily chart can rebound upward after touching the channel support line.

Source: ETH/USD TradingView

It can be seen from the MACD chart that the golden cross was formed on February 3. The MACD line (green line) and the signal line (yellow line) have formed an opening and gradually decrease in a state of convergence, but from the perspective of transaction volume, the trading volume is decreasing indicating that in the near future, a dead cross may be formed. If the Ethereum price falls below the support line of the upward channel and forms a dead cross with a greater trading volume, there will be a relatively large drop in the Ether price in the short term. 

At the time of writing the Ether price is $1627 according to CoinMarketCap. If Ethereum closes the day below the 9-day MA, we will likely see a drop to $1500 before a rebound back towards the top of the ascending channel. 

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