Cryptocurrency Derivatives Series: Brazil’s SEC CVM Orders Cryptocurrency-Exchange Binance To Stop Futures Trading
Spotlight on Bakkt & CME BTC Futures With Mounting Institutional Interests As Bitcoin Bulls Halt $11k
Bitcoin price action (BTCUSD at Coinbase) has been resounding, as it rebounds above $11k mark. Bulls are on the verge of 1-year highs after decisive breakout of long-lasting range with the stern bullish candle yesterday (refer daily chart), while both leading & lagging indicators are in line with the prevailing upswings.
On a wider perspective, BTC has spiked since mid-March, from $3,858 to the current highs of $11,420 which is 196% rallies but currently broken out of the range and retraced 50% Fibonacci levels of December 2018 lows to the all-time highs in 2017 (refer weekly plotting).
With that underlying movement, Bakkt, the ICE’s subsidiary, has made commendable record numbers of trades for its monthly Bitcoin futures contracts as BTC prices is surging higher above $11,000 mark.
The major driving force for such spiking futures trading is seen as mounting institutional interests that reported its highest participation for Bitcoin monthly futures as on July 29th with 11,706 contracts.
Currently, Bakkt BTC Futures (BBF) of monthly settled contracts are trading at $11,155 levels (at press time). The open interest and volumes of BBF are considerably risen along with the rising prices (refer 3rd chart), this has been constructive sign for the future price prospects.
Elsewhere, CME’s 6-month Bitcoin futures contracts expiry is on this 31st July.
CME’s Bitcoin futures contract, ticker symbol BTC, is a USD cash-settled contract offered to CME brokers and traders based on the CME Crypto Facilities Bitcoin Reference Rate (BRR). The nature of futures contracts means they need to be settled on a predefined date. All contracts will have to be traded, or settled, before this date.
There is generally a fall in the trading volume of futures around expiration, which coincides with a rise in volatility and a potential short/long squeeze. However, the daily volume rose to $1.3 billion while open interest numbers are yet be settled, also soared to $724 million.
Well, foreseeing the upside risks, the long hedges have already been advocated in our recent posts using CME BTC futures when the underlying BTC spot was trading at $4,927 levels, and we wish to uphold the same positions by rolling over August months tenors. It is unwise to keep speculating on the next upside target and accumulate fresh bitcoins or go for fresh short build-ups at this juncture. Instead, one can certainly uphold the above advocated long hedges for now (spot reference: $11,101 levels).