Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Stocks

COT Report Data Work Backwards in Bitcoin

by October 7, 2022
October 7, 2022
COT Report Data Work Backwards in Bitcoin

The data that the CFTC publishes in its weekly Commitment of Traders (COT) Report tell us about the positioning of the different types of traders that they track. That can provide useful sentiment indications for a variety of futures markets, if interpreted correctly. This week, I look at how the COT data on Bitcoin futures go against how things normally work.

The “commercial” traders are the ones who use the subject commodity in their trade or business. Usually, they are the smart money. The “non-commercial” traders are the large speculators — think hedge funds. And the “non-reportable” traders are ones whose positions are so small that the CFTC figures they are not worth bothering to track individually.

As mentioned, in most futures contracts, it is the commercial traders who are the “smart money.” But in Bitcoin, things work differently. There, it is the large speculators who are the smart money, most of the time. The COT Report data on Bitcoin futures only go back to 2018, so there is not a lot of history on this topic. 

The chart above shows that the non-commercials’ net position as a group is positively correlated with the Bitcoin price action. And when they get to a big skewed position, that tends to matter as a sentiment reading for Bitcoin prices. These traders have been net long since earlier this summer, evidently expecting a bounce to come for Bitcoin prices.

It is a rather fascinating, but not surprising, historical oddity that Bitcoin prices peaked with the debut of the BITO ETF, which allows you to hold a Bitcoin proxy in your brokerage account. And the week that the inverse ETF BITI was opened for trading marked the bottom.

By contrast to the large speculators, the commercial traders’ net position in Bitcoin futures is inversely correlated with Bitcoin prices. The normally smart money crowd seems to be quite horrible at knowing what prices are going to do.

During some of the history of the COT data, there have been periods when there were zero contracts held by the commercials. We do not know what the characterizations that the CFTC has chosen to make about the commercial traders of Bitcoin futures are, but we can say that these traders do not seem to be very prescient about what Bitcoin prices are going to do.

There is a new product just out for those wanting to play with Bitcoin futures. The Micro Bitcoin futures contract is worth 1/10 the amount of the big one, and it has been rapidly gaining a following among traders. And, as with the big Bitcoin contract, it appears that it is the non-commercial traders who are the smart money, although that was arguably not the case in the first few weeks of its trading back in mid-2021.

The bottom chart shows the net position of those non-commercial traders in the Micro contract, and what I find noteworthy is the rapid move toward an even bigger net long position that they have been undertaking in the past 8 weeks, and that is with Bitcoin prices mostly going sideways during that time. So one cannot say that this position change is price-induced; they are moving further to the long side based on no price action. Evidently they know something, or think that they do. History suggests that this will be a bullish development for Bitcoin prices, eventually.

0
FacebookTwitterGoogle +Pinterest
previous post
Why This Rollover Is So Important
next post
Seattle-Area Elementary School Reportedly Canceling Halloween: If Some Students Don’t Celebrate It, Nobody Can

You may also like

How to Increase Your Win Rate

June 22, 2023

Introducing the Four Horsemen of MELA; Homebuilders Thrive...

April 23, 2023

DP Trading Room: Dividend Investing

August 29, 2022

Analyzing Investor Sentiment for Gold

September 20, 2024

What Bitcoin Is, and How That Has Changed

September 22, 2023

Uptrend Shakes as Liquidity Dries Up; Bond Market...

February 20, 2023

Return of the REITs?

January 13, 2023

Three Charts Showing Proper Moving Average Alignment

June 5, 2025

Top Ten Hidden Features of StockCharts, Features 1-5

November 8, 2023

Sector Spotlight: Monthly Charts Suggest Downside Risk is...

November 2, 2023

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Hegseth tears up red tape, orders Pentagon to begin drone surge at Trump’s command

      July 10, 2025
    • SCOOP: Sen Ron Johnson readies subpoenas for FBI, DOJ in Butler shooting probe

      July 10, 2025
    • Jackson defends controversial, fiery SCOTUS dissents as telling people ‘how I feel’

      July 10, 2025
    • How to Find Compelling Charts in Every Sector

      July 10, 2025
    • AstroTurf Leads Innovation in Player Safety and Sustainability for Modern Sport

      July 10, 2025
    • Russia sanctions bill gains steam as White House appears to change tone on Putin

      July 10, 2025

    Categories

    • Business (8,444)
    • Investing (2,115)
    • Politics (16,000)
    • Stocks (3,199)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved