Cryptocurrency Derivatives Series: Bitcoin Traders’ Eyes on Volumes and Open Interest at CME and Bakkt

Bitcoin price sinks below $8k mark in major exchanges creates renewed short-term selling opportunities.

For instance, BTCUSD at Coinbase, while sliding below $9,000 - 8.5 marks, anyone can easily make out the huge bearish sentiments with the dipping volumes.

The importance of these volumes and most importantly, the open interests (OI) on a monthly basis: The technical methodology of analysis the trend of any asset class, is the empirical study of three factors of the asset, namely: price, volumes and open interest, and bitcoin is no exception from this.

Contemplating with the price being decreased, along with that the declining OI (refer monthly open interest data which is in the negative numbers in the above nutshell provided by CME group and refer 3rd exhibit for sloping OI curve), the underlying market is perceived to be making some sort of strength for the long-run.

Whereas, also be noted that the dipping price along with the dipping volumes is also a sign of weakness in the market for the short-term traders when we plot the intraday charts.

In addition, the first week’s performance of much-hyped and curiously anticipated Bakkt’s launch of bitcoin futures with physical-delivery facility, has also been lacklustre, registered only about $5.8M of BTC trading volume. 

Crypto-enthusiasts in the avenues perceive ‘Bakkt’ as the important driving force for the institutional investors’ entry in the market. 

It is wise to be cautiously positioned at this juncture that this could only be buy at dip opportunities for the long-term investors. Whereas, for the traders in futures can eye on some short-term selling opportunities with some risk appetite.

Usually, as the contract period approaches expiry, the futures price likely to converge to the spot price of the underlying asset.