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FxWirePro: Take a look at Open Interest of CME and CBOE BTC futures

Year-2018 for cryptocurrency has had the mixed bag of sentiments amid series of regulatory and fundamental news.

Cryptocurrency derivatives have been the centre of attraction in the recent past. Cryptocurrency derivatives, including cryptocurrency futures, cryptocurrency CFDs, and cryptocurrency options) have been under the meticulous scanner of the renowned global regulators, such as, US SEC, CFTC and UK’s Financial Conduct Authority (FCA). 

Participation by financial institutions, proxied by Bitcoin futures volumes in CBOE and CME, has declined also. 

As 1stchartshows, open interest in the CME contract, where futures activity has increasingly concentrated, has declined to $65mn this week, at the very low end of this year’s range (refer 1stchart).

The open interest in the CBOE contract continued its downtrend to the lowest level since inception. 

More importantly futures volumes as a proportion of trading volumes on bitcoin exchanges has declined to below 1%, the lowest level since the beginning of the year and well below the 10% high seen in the summer (refer 2ndchart).

In other words, participation by financial institutions in bitcoin trading appears to be fading. Courtesy: JPM

Trade tips: At spot reference: 3704 levels, on trading grounds, one can initiate BTCUSD boundary option spread strategy with upper strikes at 3900 and lower strikes at 3515 levels.

The trading between these strikes likely to derive certain yields in this perplexed trend in the short term, more importantly, these yields are exponential from spot movements.

For cash or nothing, these options would be exercised if the forward prices to remain between both strikes (i.e. 3900 > Fwd price > 3515 levels).

Alternatively, one could initiate long positions in CME BTC futures contracts of near month tenors with a view of arresting upside risks.

Currency Strength Index: FxWirePro's hourly BTC spot index is inching towards -31 levels (which is mildly bearish), while hourly USD spot index was at 37 (mildly bullish) while articulating (at 12:01 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex

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