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

Future Retirement Success

Stocks

Bitcoin Futures Open Interest Spike

by November 4, 2023
November 4, 2023
Bitcoin Futures Open Interest Spike

There is growing speculation that the Securities and Exchanged Commission (SEC) of the U.S. federal government is close to approving one or more spot Bitcoin ETFs to begin trading. That speculation has driven up Bitcoin prices to the highest level in more than a year. It has also driven up total open interest in Bitcoin futures.

Bitcoin has been around as a cryptocurrency since January 2009, but Bitcoin futures contracts have only been trading since December 2017. And they did not make an appearance in the CFTC’s Commitment of Traders (COT) Report until April 2018. Adoption of trading Bitcoin futures has been gradual, and it is still a long way from matching the size of total open interest we see in the eMini S&P 500 contract, for example, which recently had over 2 million contracts of open interest.

The fascinating aspect of total open interest in Bitcoin is that, every once in a while, it sees a spike in a relatively short amount of time. When that happens, it nearly always marks a turning point for Bitcoin prices. It can be a top or a bottom.

This is all relevant now because Bitcoin prices have been rushing higher recently, as traders speculate on that SEC approval happening soon. They had the same rush on speculation about the debut of BITO, the Bitcoin Futures ETF, and that spike marked the all-time high for Bitcoin prices. Other spikes have marked turning points of lesser importance, but it is a reliable indication.

A spot Bitcoin ETF is a big deal because an ETF trading futures is inherently inefficient as an “investment”, because of contango in the contract pricing, though it can be useful for trading. Here are futures prices as of Nov. 3, 2023:

Nov23  34890 Dec23  35305 Jan24  35495 Feb24  35750 Mar24  35930 Apr24  35980

An ETF which owns futures contracts will concentrate its ownership in the nearest month contracts because they are more liquid. As those contracts are nearing expiration, the ETF will be forced to “roll” to contracts further into the future. Since those contracts are priced higher than the near-month contract, the ETF loses out with every roll. An investor who sits in a Bitcoin futures ETF for very long is losing value every month versus spot Bitcoins. So if a spot Bitcoin ETF could ever get approved, that would open up a new way for average investors to own Bitcoin without having to worry about “wallets”, or brokers who have not been around for very long.

Speculators are rushing in ahead of that anticipated surge in demand, just as they rushed in ahead of BITO’s approval only to see it top. The same dynamic occurred with gold when it was finally authorized public ownership in 1975. Late 1974 saw a big run up in worldwide gold prices as speculators in other countries tried to front-run the anticipated surge in demand once U.S. investors were finally going to be allowed to own gold. The initial demand never lived up to those expectations, and gold prices dropped from $186.80/oz in December 1974 all the way down to $110.10 by August 1976.

The lesson here is that those who are chasing into Bitcoin now on speculation about the impending ETF approval are likely going to end up like those 1974 gold speculators, and like the earlier Bitcoin speculators who topped Bitcoin prices as they rushed in ahead of the debut of BITO.

0
FacebookTwitterGoogle +Pinterest
previous post
Week Ahead: Broader Markets Set To Relatively Underperform; What These Nifty Levels Closely
next post
Obama calls for end of ‘occupation,’ security for Israel, state for Palestinians

You may also like

MEM TV: Are the Magnificent Seven Ready to...

October 28, 2023

The Long-Term Bull Case for Bitcoin

August 30, 2023

NVDA is Not the Only Semiconductor Stock Out...

August 30, 2024

GNG TV: Defense is Still on the Field

January 5, 2023

Be Ready for the Next Bull Market

November 9, 2022

Net Put Premium And Options Expiration Week Suggest...

October 16, 2022

An All-Around Rally: Navigating Stocks, US Dollar, Gold,...

November 22, 2024

Hedging the S&P All-Time Highs With Options

May 22, 2024

Equities Set New Highs As Growth Sectors Drive...

July 8, 2024

The Bull Has Left the Bear in the...

November 17, 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

    • Trump warns of ‘serious consequences’ if Elon Musk funds Democrats

      June 7, 2025
    • Musk jokes about reconsidering stance on Big Beautiful Bill after Schiff’s praise

      June 7, 2025
    • Musk deletes explosive posts about Trump and Epstein files

      June 7, 2025
    • House witness flips script on Dem who ambushed him during hearing with unearthed tweet: ‘Iceberg is ahead’

      June 7, 2025
    • Call with China’s Xi, and Trump-Musk exchange fueled barbs during 20th week in office

      June 7, 2025
    • Trump’s conservative allies warn Congress faces critical ‘test’ with $9.4B spending cut proposal

      June 7, 2025

    Categories

    • Business (8,152)
    • Investing (2,019)
    • Politics (15,568)
    • Stocks (3,136)
    • 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