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September 21, 2020
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Will CME let Bitcoin’s price soar?

Taken as a benchmark when negotiating Bitcoin futures contracts, CME has raised questions about its influence on cryptocurrency prices in recent times.

For some years now, the Chicago Mercantile Exchange (CME) has been at the forefront for the largest Bitcoin market. Since the launch of the first regulated derivative contracts for cryptocurrencies, together with its exchange exchange on Chicago Board of Options Exchange (CBOE), CME has had a major influence on the market.

Starting by pulling Bitcoin beyond the five digits, forming gaps in graphs and continuously tracking the asset price, the links between CME and the Bitcoin price remain. In the last year, the exchange traded, on average, 6,000 Bitcoin contracts per day, with quantities exceeding 20,000 contracts on days of high volatility (with each valued at 5 Bitcoins).

The current Feeling at the brokerage

In the past two months, open interest of CME’s Bitcoin futures have been charging more than other exchanges, growing consistently from $ 107 million in mid-March to more than $ 530 million in mid-May.

Now, with Bitcoin expecting a breach above $ 10,000, it seems that traders at CME are bullish with respect to the main cryptocurrency. With traders positioned up to $ 10,390, the highest price traded by Bitcoin during the last bullish move, traders ended up not closing their positions.

According to a report at Ecoinometrics, exchange traders did not worry earlier this week when the cryptocurrency hit the five digits and fell hours later.

Even a false break above $ 10,000 this week has not resulted in many people giving up on their expectations for a bull market.

In fact, traders expect there to be a move before the end of the month as the report found a total of 35,000 contracts are due to expire on 26 June. Given this massive closing on the horizon, the scarce number of settlements, the Open Interest growing, in addition to consistent volume, traders “are still waiting to see Bitcoin advance significantly beyond $ 10,000.”

Bitcoin options add uncertainty to the table

In early 2020, CME launched the Bitcoin options and after seeing a drop in volume in the first few months, the game turned. While reaching less than $ 1 million in volume since the beginning of 2020, Bitcoin Options at CME saw an average of $ 25 million in trade volume in the week of halving, between May 11-15.

Open Interest of Bitcoin options at CME. Source: skew

Since the Options have emerged and they tend to remain high for the month of June, the analysis above the skew is important. The analysis highlighted that the Bitcoin Options market is “totally driven by activity in calls.” As calls govern (and have governed the market) and although many call contracts have expired on May 29, the Open Interest of Bitcoin Options at CME is still in its ATH (all-time high, or ‘historical maxim’). The report estimates calls at 25,000 contracts – priced between $ 10,000 and $ 15,000.

No matter how you look at it, CME will affect the price of Bitcoin. Now, if she is going to ‘tame’ it or let it run freely, it is a question that will be answered in the coming months.

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