Today the open interest on Chicago Mercantile Exchange Bitcoin (BTC) futures reached a new all-time high at $841 million.
Although this can’t be deemed bullish on a standalone basis, it does signal that professional investors’ interest in Bitcoin continues to grow at an immense rate.
CME Bitcoin futures open interest in USD terms. Source: Skew
Futures premium provides more useful data
The best way to gauge inventors sentiment on futures contracts is by measuring their premium versus Bitcoin’s market price at spot exchanges. Typically, the indicator should display a 0.5% to 1% premium for 1-month contracts in CME futures.
By postponing the financial settlement date, it is only natural that sellers are required to put up more money.
On the other hand, an excessive premium will create an arbitrage opportunity, as one can sell the futures contract while simultaneously buying the same amount on spot markets. This is a neutral market strategy, commonly known as ‘cash and carry.’
CME Bitcoin futures basis, or premium. Source: TradingView
The above chart shows how the basis has consistently held a favorable terrain since mid-March, recently sustaining levels above the 1% premium for ten consecutive days.
A positive basis indicates contango, meaning sellers are demanding more money to postpone settlement.
This situation, known as contango, is the primary indicator of a healthy and bullish derivatives market. This is especially true when open interest increases, as new positions are being created under these ideal circumstances.
CME Bitcoin options markets are growing
CME Bitcoin options markets are relatively new, having just launched in January 2020. It certainly looks modest compared to the leading exchange Deribit, although CME has reached an impressive $440 million open interest in late-June.
Bitcoin options open interest. Source: Skew
The current $171 million CME options open interest carries a trend that has been consistent since its launch, as they are heavily…