a report by K33 research analysts has provided insight into the demand for institutional investor demand Bitcoin has increased before a possible approval of a Spot BTC ETF. The research firm highlighted a specific indicator to make their point and provided further insight into what the future holds if these ETFs are approved.
The derivatives market: an indicator of institutional interest in Bitcoin
In the report written by K33’s Senior Analyst Vetle Lunde and Head of Research Anders Helseth, they noted that the derivatives market was important because it can be used to gauge institutional traders’ interest in Bitcoin. In line with this, they discussed how there has been a significant increase in open interest in the Chicago Trade Fair (CME) derivatives market.
The K33 report specifically noted that the CME’s open interest grew by over 3,4000 BTC over the past week. Meanwhile, CME’s open interest remains near an all-time high of 110,000 BTC. The increased activity on the CME is the result of these traders’ desire to gain exposure to Bitcoin ahead of the “an ETF ruling soon.”
Immediately possible approval on the horizonIt is believed that many traders want to make as much profit as possible from this bullish event. Meanwhile, others have become really bullish on the flagship cryptocurrency and want to gain exposure to it any way they can. The CME is perhaps the most accessible means for this category of investors to gain exposure to Bitcoin.
Notably, K33 analysts highlighted how open interest in the CME exchange had fueled the stock pace back in October. Coincidentally or not, this happened during Bitcoin and the broader crypto market gained steamas many believed the rumors about the Spot Bitcoin ETF were the reason for the rally.
BTC price at $42,851 | Source: BTCUSD on Tradingview.com
CME loses market share as soon as ETFs are approved
NewsBTC had in November reported how CME overtook Binance in Bitcoin futures. Facts from Coinglass also shows that the CME still has a big lead in terms of Bitcoin futures open interest. That could change soon enough, however, as the K33 report raised the possibility that open interest in CME could collapse once these Spot Bitcoin ETFs are approved.
An approval could put selling pressure on CME as these institutional investors may look to make profits while others look to move their capital into the Spot ETFs. K33 discussed the latter in more detail. The report notes that futures-based ETFs currently represent 46% of CMEs open interest.
Given that futures and spot ETFs will compete directly with each other, they expect the latter to become the more favorable option. As such, these K33 analysts foresee a decline in open interest, which these futures ETFs are taking into account. They predict that many institutional investors will want to rotate a substantial portion of their capital into the Spot ETFs.
At the time of writing, Bitcoin is trading around $42,800, down in the past 24 hours. facts from CoinMarketCap.
Featured image from RIS Media, chart from Tradingview.com
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