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Pro traders ‘paying handsomely’ for Bitcoin bets send volume to two-year high

Pro traders ‘paying handsomely’ for Bitcoin bets send volume to two-year high
Traders are loading up on Bitcoin bets on the CME as volumes reach multi-year highs. Credit: Shutterstock / Joseph Sohm
  • Bitcoin futures volume on the CME reached almost $70 billion in November.
  • Traders paid premiums to roll over futures contracts as they bet on Bitcoin ETF approval.
  • Increased activity on the CME has preceded sell-offs in the past, following positive news in crypto markets.

Happy Tuesday!

Institutional traders are paying premiums to roll over Bitcoin bets as they speculate on exchange-traded fund approvals.

Let’s dig in!

Pump and dump?

Crypto action on the CME is heating up as traders place bets in anticipation of Bitcoin ETF approval — and traders could look to exit on approval.

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The CME has seen a record number of open Bitcoin futures contracts in recent weeks. Volumes have now reached the highest point since November 2021.

On Friday, traders paid massive premiums to roll over contracts on Bitcoin futures, according to K33 research. When futures contracts approach expiry, some traders roll over to contracts with expirations further down the line.

Rolling over can get expensive for traders when futures markets price in further price increases and trade at a premium — this premium is known as contango.

Bitcoin and Ether futures are in contango on CME at the moment, with both trading at a premium of 13% versus spot prices as of Monday, according to data from K33 Research.

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Institutional traders from traditional finance are “long crypto ahead of ETF news,” and are “now paying handsomely to roll it,” Joshua Lim, former head of derivatives at Genesis Trading said on X.

Traditional finance players are long at the moment, and are “probably thinking about when to exit this trade,” Lim said, adding “around ETF announcement expect retail to pile in…and expect TradFi guys to exit.

Lim noted that in 2021 the futures market traded near highs just prior to Coinbase’s initial public offering, a proxy for traditional investors to bet on crypto, and before the launch of the first Bitcoin futures ETF in November 2021.

Asset managers have led the charge, adding nearly $1 billion in long positions since October, according to the Commodity Futures Trading Commission’s weekly report on traders.

The Chicago-based exchange has attracted increased crypto interest throughout 2023 as investors sought out regulated venues in the wake of the FTX collapse and the US Securities and Exchange Commission’s clamp down on crypto.

CME overtook Binance as the largest exchange for Bitcoin futures trading earlier this month. The exchange’s head of crypto told DL News there was a “flight to regulated futures contracts,” after 2022.

Crypto market movers

  • Bitcoin traded around $37,400 on Tuesday, up 1% in the past day.
  • Ethereum was flat over the past 24 hours to just above $2,000.

What we’re reading

Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at adam@dlnews.com.