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CME Group Futures contracts are literally agreements to buy or sell an asset on a future date and for a fixed price.... More volume and open interest continue to grow in 2020. Rising futures interest in a market often coincides with a trend continuation, which would mean further upside for the BTC price.
The Bitcoin price has been rising impressively throughout 2020. Starting the year at around $7,200, the leading cryptocurrency now trades for more than $10,100.
Analysts have attributed the rising price to many different factors. BeInCrypto has previously reported on those that believe in Bitcoin’s growing use a safe haven asset, the argument that dominant global fiscal policy alone promotes BTC adoption well enough, and those that reason that pre-halving speculation is the cause of the 2020 pump so far.
As always, it’s almost certainly a myriad of the above factors, along with others, causing the current bullish Bitcoin price action. The question for many is: will it continue?
As Twitter-based cryptocurrency market analyst Unfolded (@cryptounfolded) points out, both volume and open interest in the CME Group’s Bitcoin futures contracts continue to look strong. Open interest at the derivatives exchange stands at $338 million and daily volume stands at $475 million.
— Unfolded (@cryptounfolded) February 19, 2020
Similarly, analyst skew (@skewdotcom) also reports a swelling derivatives market. Last week, options volume and open interest hit all-time highs on multiple exchanges.
Last week on https://t.co/0KkntYiyQp 📈
– Ether on the move
– Bitcoin futures open interest & options volume records for multiple exchanges
– Initiated our spot market coverage
– Added access to all historical data
– Users from 48 new firms joined our professional network pic.twitter.com/5CIVMQOtWy
— skew (@skewdotcom) February 17, 2020
The growing Bitcoin derivatives demand alone says little about the price action of the underlying asset. However, when compared to price trends, it can give traders useful indicators.
Cryptocurrency trader and analyst Murad Mahmudov detailed what changes in open interest can mean for a trend.
When open interest is rising in tandem with both price and volume, the interpretation is a trend continuation. This appears to be the case in the Bitcoin market at present.
— Murad Mahmudov 🚀 (@MustStopMurad) January 12, 2020
Also highlighted in Murad’s tweet is a potential signal that can show an imminent trend reversal. A drying up of futures open interest and volume can mean that momentum is weak and either a downtrend or uptrend is in jeopardy. Traders currently looking to exit a long position may benefit from observing these futures interest metrics.
Although the interest in futures suggests further upside for Bitcoin, the jury is still out as to whether the derivative products are generally good for the cryptocurrency industry. As BeInCrypto has previously reported, some observers believe non-physically-settled derivatives to be part of a Wall Street effort to “tame” Bitcoin.
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