Futures contracts are part of the class of derivative instruments and allow holders to speculate on prices, without necessarily owning the asset.
With the increase in interest in Bitcoin, new ways of trading the asset have emerged, including Bitcoin futures contracts in 2014, representing more liquidity and professionalism for the market.
In 2017, these instruments became evident through Bitmex and are a great attraction for institutional players, as they enable the execution of diversification and portfolio protection strategies.
For this reason, other companies in the traditional market started to supply futures contracts, such as CME and ICE, which owns the New York Stock Exchange, launching Bakkt.
Bitcoin futures contracts allow investors to have exposure to that digital currency without having to maintain the underlying cryptocurrency. Just as it is used for a commodity or stock index, these contracts allow investors to speculate on the future price of Bitcoin.
Many traders and analysts closely monitor the correlation between price, volume and open interest and use this information as complementary indicators to try to understand market sentiment, seeking to identify the strength behind a trend.
Open interest refers to the total value of derivative contracts
that have not yet been liquidated.
It is calculated by adding all open positions, regardless of whether they are long or short, subtracting those that were closed. The volume considers all contracts that were negotiated in a given period.
The greater the open interest, the greater the amount of money entering the market, which may indicate an increase in prices, since the opposite may be indicative of weakness in the price.
A derivative is a financial security that has its value derived from the price fluctuations of an underlying asset - a benchmark.
The open interest and bitcoin futures contracts at CME Group reached a historic high of $724 million. The previous record was about $ 532 million, which was recorded in May.
This analysis suggests that more money is flowing into the market and traders expect a short-term increase in Bitcoin's volatility.
The average daily trading volume on Bitcoin futures, which has been around $ 276 million so far, has risen to $ 1.33 billion, as can be seen in the chart.
CME launched its Bitcoin futures in 2017 and is a very important player in institutional terms, as it is currently the only one to offer this type of Bitcoin futures contract in the US on a regulated basis. Earlier this year, the exchange also started trading Bitcoin options.
A few days before the $10,000 breach, the open interest of Bitcoin futures on BitMEX spent $1 billion for the first time since the March crash, when open interest was around $1.2 billion.
Adding all exchanges together, open interest exceeded $4 billion for the first time since March, signaling the accumulation of open positions by traders.
LOOKING AT THE HISTORICAL PERFORMANCE OF BITCOIN'S PRICE IN RELATION TO THE OPEN INT ER EST, THERE IS A POSITIVE RACE AND LESSON, PARTICULARLY EVIDENT ON MARCH 12 AND 13, WHEN BITCOIN LOST ALMOST 40% OF THE S I GO LOR.
BAKKT, ANOTHER PLAYER, FOCUSES ON THE INSTITUTIONAL INVESTOR, IN spite of having a smaller volume compared to other platforms, it also presented an increase in volume and open interest.
Okex is among the largest trading volumes for futures contracts.
Outstanding contracts increased very quickly during the week, from $ 800 million last Friday to $ 1,107,440 billion.
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