The open interest (OI) of Bitcoin (BTC) futures trading on the Chicago Mercantile Exchange (CME) gradually approached setting a new record on October 14 when BTC returned to a five-month high of $58,550 on BitStamp.

According to data provided by ByBt.com, the total number of derivatives outstanding in the CME Group’s bitcoin futures market has reached $3.22 billion, just $40 million lower than the record high set in February 2021. However, OI turned out to be higher than what was at its peak Bitcoin price in mid-April.

Specifically, the CME bitcoin futures OI was $3.02 billion on April 14, the day BTC price reached nearly $65,000. But on October 14, OI was more than 6% above the reading since mid-April, despite BTC price hovering around the $57,000-58,550 price range.

CME Bitcoin Futures unlocks interest rates. Source: ByBt.com
Traders often use the OI as an indicator to confirm trends in both the derivatives and spot markets. For example, the increasing number of existing derivative contracts is interpreted as new money entering the market, regardless of bias.

Meanwhile, in the case of bitcoin, the increased open interest in the futures market indicates the desire of accredited investors to increase access to bitcoin.

The commercial sector increases exposure to Bitcoin futures
Recent OI readings indicate that more institutional capital is entering the bitcoin market. As a result, investors are more confident in opening new positions in the $50,000 to $58,000 price range, while the volume of continuing education institutions has increased over the past seven days.

Bitcoin futures – volume and open interest rate. Source: CME
Analysts see steady growth in OI, volume and price as signs of new purchases in the futures market. It also improves the position of the underlying asset to continue the uptrend. Thus, Bitcoin appears to be experiencing a similar upward trend.

Clear evidence of Bitcoin’s optimism is the CFTC’s October 5th report. He notes that the trading sector, which consists of corporate hedges, has been quick to buy bitcoin futures. Now their net position is over 10,000 BTC.

CME BTC Futures changes positions. Source: CFTC, Forbes
Meanwhile, hedge funds and private investors have found themselves powerless in the bitcoin futures market. However, their tactic may be to compensate for long positions elsewhere, such as the spot market.

This is primarily due to the higher annual premium available in CME Bitcoin futures prices compared to the spot markets. In recent days, the CME Bitcoin futures price has been regularly trading 15% higher than the spot BTC price, up from around 7.7% on average in the first nine months of 2021.

Bitcoin futures premium compared to spot prices. Source: Skew
The overall basis for the emergence of Bitcoin
The latest wave of buying in the spot bitcoin market also came after data from US regulators.

For example, Gary Gensler, Chairman of the Securities and Exchange Commission (SEC), and Jerome Powell, Chairman of the Federal Reserve, have been advised not to ban Bitcoin. Meanwhile, the growing prospect of a Bitcoin ETF being approved by the SEC is also fueling the “buy rumor” narrative.

On the subject: Bitcoin Analyst ‘Extremely Skeptical’ of Return to $50,000 – Will Weekly Close Lead to Correction?

Investors were also eager to enter the Bitcoin market as US consumer prices continued to rise. The Consumer Price Index (CPI) rose to 5.4% on an annual basis in September for the first time in thirteen years, according to the Labor Department.

Inflation in September was 5.4%, the highest level in 13 years.

Bitcoin just crossed $58,000, the highest price since May this year.

Bitcoin continues to serve as the world’s best inflation hedge.

– Bomb (@APompliano) October 14, 2021
JP Morgan Chase noted in a recent report that rising inflation has led institutional investors to look for opportunities in bitcoin, while some view cryptocurrencies as a better safe source than gold. In another report, released in January 2021, the American banking giant predicted that the long-term price of BTC would reach $140,000.

The post states that “pressure on gold as an ‘alt’ currency means significant upside potential for Bitcoin in the long run.”

“The convergence of volatility between bitcoin and gold is unlikely to happen quickly, and from our point of view it is a multi-year process.

Source: CoinTelegraph

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