Cointime

Download App
iOS & Android

CME, Where Institutions Trade Bitcoin Futures, Flipped Binance. Is That as Bullish as It Sounds?

Validated Individual Expert

CME Group is now the place to trade bitcoin futures, apparently. For the first time in months, if not years, CME is now seeing more BTC futures trading than on the world’s largest cryptocurrency exchange, Binance. This flippening, which has happened before, but doesn’t happen often, is often seen as a sign of increasing institutional interest in crypto.

CME, which incidentally but (please believe me) unrelatedly is the sponsor this week for The Node newsletter, is often seen as The Exchange for Grownups. Whereas, with Binance and co., I think very few people are putting on ties to go to work to trade bitcoin perps on a native crypto exchange.

See also: Ethereum Futures Are Now Trading on CME

Don’t just take my word for it, CoinDesk’s markets guru Omkar Godbole said CME is “considered a proxy for institutional activity” in crypto, on CoinDesk TV’s “First Mover.” “What we are seeing right now is a good old pump of open interest on the CME futures,” he said. Open interest refers to the dollar value of existing futures contracts.

Perhaps this interest is being driven by bitcoin’s price, which has rallied over 100% year-to-date, and institutions want a little bit of the action. Or, it’s because they are taking bets that the narratives around a potential spot bitcoin exchange-traded fund (ETF) being listed by year’s end or the Bitcoin halving on the docket for next year will spur even more buying.

Futures are a type of derivatives contract that requires buyers to purchase bitcoin at a predetermined price at a later date. They’re essentially a hedge against a future price movement, and are commonly used to bet that you can buy an asset today for less you could at a later date.

And lot’s of people seem to think bitcoin has legs to run, yet. Bitwise Chief Investment Officer Matt Hougan essentially said that all the bitcoin ETF hype is not fully “priced in” yet. To be sure, the chief investment officer of a crypto investment company has many incentives to believe something like that and drum up support for that thesis.

It’s also a kettle-of-worms getting into the question of whether the Bitcoin halving is priced in, especially at this point, when it is still six months away. There’s certainly something reasonable about the idea that the fewer new bitcoins released into circulation (as part of the “mining subsidy, which is halved programmatically every four years — hence “the halvening”) will be good for bitcoin’s price. It’s the same theory of supply and demand behind the idea that bitcoins, capped at 21 million coins, are scarce and therefore valuable.

But, if you believe in efficient markets, then you’d have to think a pre-scheduled event that 99.9% of all bitcoin holders know about and eagerly await would have to be “priced in.” Then again, it’s hard to say crypto markets are efficient. And the same guys who thought up the Efficient Markets theory also said it’s impossible to find a $10 bill on the street, because, if it was there, it’d already be pocketed by someone. Yet I find (and lose) money all the time, and crypto traders sometimes make money off of market inefficiencies.

Anyway, to make things even more complicated, Godbole said that typically when open interest in bitcoin futures is growing on CME, it’s an indicator that bitcoin’s price is about to drop. This isn’t a hard-and-fast rule, but has been an observable trend following the few times when CME flippened Binance. “Both times, CME's move to the top spot marked price top,” he said.

What’s more, while CME’s open interest have grown the flippening this time around may have multiple factors. First, Binance’s market share of futures contracts compared to the CME has been on a long-term decline, perhaps due to the exchange’s legal troubles in the U.S. and E.U.

See also: Citigroup to Trade Bitcoin Futures on the CME?

And lastly, there’s also a difference between the types of derivatives traded on CME, where a few traders took out bullish bets, and on Binance, which actually had a high amount of open shorts (bearish bets on BTC’s price) that were liquidated during the recent price rally, Godbole said.

“So, while we're seeing a spike in CME contracts, that doesn't necessarily mean that the futures market is suddenly exploding,” he said.

What does this all mean for bitcoin? Are the institutions here? Will the price continue to climb? Dear reader, if I knew I wouldn’t be writing about it — I’d be gambling.

Comments

All Comments

Recommended for you

  • Hong Kong's financial industry may study launching stablecoin trading desks and institutional custody services

    Hong Kong Monetary Authority recently announced the list of participants in the stablecoin issuer sandbox, including JD Coin Chain, Circle Coin Innovation, Standard Chartered Bank, Anni Group, Hong Kong Telecom and other institutions. Research reports released by Zeng Shengjun, a researcher at the Greater Bay Area Financial Research Institute of the Shenzhen Branch of Bank of China, and Guan Zhenqiu, a researcher at the Hong Kong Financial Research Institute of Bank of China, analyzed that the Hong Kong dollar stablecoin can improve the efficiency and inclusiveness of the Hong Kong financial system. Its stability, free convertibility, high security, high open source and cross-border mobility can provide support for a wider range of financial innovations.

  • Bitcoin scaling network Mezo completes $7.5 million in financing, led by Ledger Cathay Fund

    Bitcoin scaling network Mezo has completed a $7.5 million financing round, with Ledger Cathay Fund leading the investment and Mantle EcoFund ecosystem projects from ArkStream Capital, Aquarius Fund, Flowdesk, GSR, Origin Protocol, and Bybit participating. This round of financing brings its total funding to $30 million.The new funds will be used for Mezo's plan to expand the adoption of its network, including integrating more products into its network, such as its Bitcoin staking platform Acre.

  • As of July 25, BlackRock IBIT held more than 338,000 bitcoins, an increase of more than 1,092 bitcoins from the previous day.

    BlackRock's official update on the Bitcoin ETF shows that as of July 25th, the market value of IBIT has reached $21,890,121,436.41, and the position has increased to 338,128.5551 BTC, an increase of 1,092.7881 BTC from the previous trading day.

  • The U.S. core PCE price index rose 0.2% in June, compared with expectations of 0.1% and the previous value of 0.10%.

    The US core PCE price index for June was 0.2%, exceeding expectations of 0.1% and the previous value of 0.10%; the US core PCE price index for June recorded a year-on-year increase of 2.6%, higher than expected. The US core PCE price index for June recorded a monthly rate of 0.1%, unchanged from the previous month and in line with expectations.

  • LayerPixel Completes $2 Million Seed Round Led by Kenetic Capital

    LayerPixel, a DeFi solution based on TON, announced the completion of a $2 million seed round of financing, led by Kenetic Capital, with participation from Foresight Ventures, Waterdrip Capital, VentureSouq, Web3 Port Foundation, Microcosm Research, TMM Club, and dozens of angel investors. It is reported that this funding will help LayerPixel accelerate the development and integration of its DeFi solution suite in the Telegram Mini App ecosystem, fundamentally changing the way users interact with decentralized finance in the Telegram environment.

  • Grayscale GBTC holdings are approximately 271,200 BTC, and the number of ETHE shares in circulation has fallen below 300 million

    Official data from Grayscale shows that as of July 25th, Grayscale GBTC holds 271,212.2467 BTC, a decrease of 410.3257 BTC from the previous trading day, with an asset management scale (non-GAAP) of $17,542,084,056.48 and a circulation share of 306,180,100 shares; Grayscale ETHE holds 2,391,684.2607 ETH, a decrease of 97,390.7166 ETH from the previous trading day, with an asset management scale (non-GAAP) of $7,468,775,526.14 and a circulation share of 282,168,500 shares; Grayscale ETH holds 310,308.0733 ETH, an increase of 13,663.3797 ETH from the previous trading day, with an asset management scale (non-GAAP) of $969,033,154.46 and a circulation share of 329,308,500 shares.

  • US Senator Withdraws Support for Elizabeth Warren's Anti-Crypto Bill

    On July 24th local time, Republican Senator Roger Marshall withdrew his support for the "Digital Asset Anti-Money Laundering Act," which he and Democratic Senator Elizabeth Warren jointly formulated for 2022, aimed at regulating the cryptocurrency industry under existing anti-money laundering and anti-terrorism financing frameworks. Currently, according to the official congressional record on the bill, there are still 18 senators supporting the bill.

  • Web3 startups raised $3.7 billion in funding in the first half of 2024, showing signs of recovery

    According to the latest report from Crunchbase, Web3 startups raised $3.7 billion in the first half of 2024. Although this number decreased by 18% compared to the first half of 2023, it increased by 42% compared to the second half of last year. Quarterly, Web3 startups raised over $2 billion in the second quarter of 2024, slightly higher than the $1.8 billion raised in the first quarter, but down 18% from the $2.2 billion raised in the same period last year. However, after eight consecutive quarters of decline, Web3 startups have seen two consecutive quarters of funding increases. In addition, although the total amount of funding has increased, there have been few large financing rounds, with only seven rounds raising over $50 million.

  • Yesterday, the U.S. spot Bitcoin ETF had a net inflow of $31.4 million

    As monitored by Farside Investors, data from yesterday (July 25th) shows that the net outflow of funds for the US Bitcoin ETF GBTC was $39.6 million; BlackRock's iShares Bitcoin Trust (IBIT) had a net inflow of $71 million yesterday; EZBC, ARKB, and BITB had no inflows or outflows of funds.

  • US spot Ethereum ETF had a net outflow of $150.4 million yesterday

    According to Farside Investors monitoring, data from yesterday (July 25th) shows that the net inflow for the BlackRock Ethereum ETF (ETHA) was $72.9 million, the net inflow for the Invesco Ethereum ETF (ETHV) was $8 million, the Franklin Ethereum ETF (EZET) had no inflow or outflow, the 21Shares Ethereum ETF (CETH) had no inflow or outflow, and the Grayscale Mini Ethereum ETF (ETH) had a net inflow of $58.1 million. Previously, it was reported that the Grayscale Ethereum ETF (ETHE) had a net outflow of $326.9 million, the Bitwise Ethereum ETF (ETHW) had a net inflow of $16.3 million, the Fidelity Ethereum ETF (FETH) had a net inflow of $34.3 million, and the Invesco Ethereum ETF (QETH) had a net inflow of $6.2 million. Overall, data shows that the net outflow for US Ethereum ETFs yesterday was $150.4 million.