CME leveraged funds raise bets against Bitcoin to record high as futures premium spikes
|Leveraged funds on the Chicago Mercantile Exchange (CME) raised their bets against bitcoin to record high in the week ended Oct. 19, possibly to profit from the widening gap between futures and spot markets prices.
The Commodity Futures Trading Commission’s (CFTC) Commitments of Traders report released on Friday showed leveraged funds held a net short position of 31,000 contracts in the seven days to Oct. 19, marking an increase of 6,000 from the previous week.
Record shorts by leverage funds does not necessarily mean these traders had a bearish bias. They may have raised short positions in the futures market and simultaneously bought the cryptocurrency in the spot market, booking the so-called carry trade.
The strategy is initiated when futures trade at a notable premium to the spot price and traders can profit from an eventual convergence of prices in the two markets.
The annualized premium in the front-month bitcoin futures contracts surged from 1% to 20% in the run-up to ProShares’ Bitcoin Strategy ETF launch on Oct. 18 and was last seen at 13%. The three-month rolling premium also rose from 3% to 16% before tapering to 11.7%.
ProShares’ ETF, which invests in the CME-listed bitcoin futures contracts, made a strong debut last Tuesday on the New York Stock Exchange, while Valkyrie’s futures-based ETF went live on Friday.
Earlier this month, analysts had warned of an uptick in futures premium and renewed interest in cash and carry arbitrage.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.