Cryptocurrency Derivatives Series: CME Group Writes CFTC to Increase Open Positions of Bitcoin Futures Contract

August month for the crypto-asset markets saw a bearish end. Market benchmark BTC fell 6.67% and 4.6% July and August months respectively, while the overall crypto market cap pulled back 5%. The underlying price has been oscillating between $9,500 to $10,500 levels from the last couple of weeks. 

It has been observed that a probable cause of such drop was due to the close of a major round of CME Bitcoin futures contracts. Over 50% of CME Bitcoin futures open interest expired in recent times. It’s likely that most of this money flowed out of Bitcoin futures and into other derivative markets. 

But for now, in a letter to the Commodity Futures Trading Commission (CFTC) regarding the increase of spot-month position limits for the Bitcoin Futures Contract, CME revealed their plans to increase the same.

Wherein, one can observe that the limit likely to surge from 1,000 contracts per spot month to 2,000 for a single investor. Earlier each contract comprised of 5,000 bitcoins, the alteration would imply a trader’s maximum exposure would double from 5,000 bitcoins to 2,000 contracts (i.e. 10,000 bitcoins, or worth $100 million approximately).

Daily volumes for BTC on the CME have been steadily falling over the last two months and institutional traders may be looking at other asset markets for new profit opportunities.

The BTC market has been able to consolidate following recent price drop with the $9500 level acting as support as the intermediate trend progressed.

As you could refer to BTC CME Futures price chart of daily plotting, hammer pattern candlesticks have occurred at $10,154 levels and taken off rallies above DMAs with little indecisiveness.