Bitcoin (BTC) Futures Lead to Disaster as Investors Flock to ETFs
According to the market report, demand for Bitcoin futures has slowed significantly since the launch of spot Bitcoin ETFs in January 2024 earlier this year. This is an early indication of how ETFs could impact other bitcoin investment products on the market.
Open Interest Declines in CME Group Bitcoin Futures
Following the launch of 10 spot Bitcoin ETFs three weeks ago, outstanding contracts, or open interest, for the CME Group fell a significant 24%, falling to 20,679 as of January 30. Data compiled by Bloomberg reveals that open interest has previously reached a record high, driven by Bitcoin’s remarkable 157% rise last year, especially in anticipation of ETF launches.
CME derivatives had gained popularity as they provided a regulated platform for exposure to Bitcoin. However, with the availability of spot ETFs that serve a similar purpose, there has been a decline in open interest in CME Bitcoin futures. Futures contracts have also been actively involved in arbitrage strategies on the $21 billion Grayscale Bitcoin Trust (GBTC), but crypto asset manager DACM suggests that this particular trade is running its course.
Courtesy: Bloomberg
Vetle Lunde, senior analyst at K33 Research, notes that there may be a decline in CME Bitcoin futures as investors shift to US ETFs and Bitcoin’s cooling rally, but these futures contracts remain important, highly liquid components of the crypto market. Lunde highlights their potential role as hedging tools for authorized participants involved in managing the creation and redemption of ETF units.
CME and cryptocurrency exchange Binance have emerged as leading platforms for Bitcoin futures. Latest data from Coinglass shows that the decline in CME open interest is a major factor contributing to the overall decline in Bitcoin futures activity.
Bitcoin ETFs in High Demand
BlackRock Inc. The January 11 launch of spot Bitcoin ETFs, which include leading offerings from financial giants such as Fidelity Investments and Fidelity Investments, initiated a significant reshaping of the market landscape. Additionally, the well-established Grayscale fund with the largest Bitcoin portfolio has transitioned to the ETF format after previously existing as a closed-end fund.
Shares in the Grayscale vehicle have experienced a shift towards a discount to the portfolio’s underlying Bitcoin holdings. This phenomenon marks a departure from early 2021, when the product was structured as a closed-end fund. ETF units often track net asset value (NAV) closely, encouraging speculators to predict that the trust discount will disappear when it actually occurs.
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Bhushan is a FinTech enthusiast and has a good ability to understand financial markets. His interest in economics and finance draws his attention to the emerging Blockchain Technology and Cryptocurrency markets. He is in a constant learning process and motivates himself by sharing the knowledge he has acquired. In her spare time, she reads thriller novels and sometimes explores her culinary skills.
The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. Neither the author nor the publication accepts any liability for your personal financial loss.
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