Bitcoin’s latest breakout above $50,000 seems to be backed by renewed institutional buying.

Front-month bitcoin futures contracts based on the Chicago Mercantile Exchange (CME) are currently trading at an annualized premium of 12.8% to the spot price. That’s the highest since mid-April and marks a significant rise from the discount of 0.36% seen a week ago, according to data provided by the derivatives research firm Skew.

The increase in premium “suggests that there is high demand among the CME traders to build long exposure in bitcoin at the moment,” Arcane Research’s weekly research note published Tuesday said. “The front-month contract on CME is by far the most frequently traded BTC futures contract on the exchange, and right now, bullish tendencies seem to be brewing on the institutional platform.”

The analyst community considers CME synonymous with institutions. These large entities prefer to trade futures of any product through an established and regulated exchange like the Chicago-based derivatives giant. Besides, CME’s regulated standard futures contracts trade in 5 BTC denominations and requires significant capital outlay typical to institutional investors.

Bitcoin was trading near $50,650, up 5.14% for the week, having rallied more than 10% last week. Expectations that the U.S. could soon approve a futures-based bitcoin exchange-traded fund are among the main factors powering the cryptocurrency higher.


ETF Store president Nate Geraci tweeted Monday that the first U.S.-listed futures ETF could be approved by the Securities and Exchange Commission (SEC) in two weeks. According to Eric Balchunas, Bloomberg Intelligence senior ETF analyst, there is a 75% chance of a futures-based ETF approval this month, most likely the ProShares Bitcoin Strategy ETF on Oct. 18. The SEC kicked the can down the road on three physically backed Bitcoin ETFs earlier this month.

“Rumours of a BTC ETF decision later in the month is spurring further demand,” Matthew Dibb, co-founder and COO of Stack Funds, said. “Bloomberg is betting on a 75% chance of an ETF this month; however, it is likely to be futures-based.”

“This rally coincides with anticipation of the Proshares ETF approval on Oct. 18,” Dibb said.

Analysts at Arcane Research said a futures-based ETF, if approved, could lead to further buying pressure on the front-month CME futures contract and a higher premium.

That’s because the ETF would gain exposure to bitcoin via regulated futures like those offered by the CME rather than buying the actual cryptocurrency. “An ETF backed by futures will simply buy the nearest dated futures contract and roll it at expiry,” Stack Funds’ Dibb said.

A continued rise in premium may entice carry traders, leading to more substantial demand in the spot market. Carry traders simultaneously enter into a long position in the spot market and a short position in the futures market in a bid to profit from an eventual convergence of the two prices on expiry. The higher the premium, the higher the return from carry trades.

All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.

Cryptos feed

Latest Crypto News

Latest Crypto News & Analysis

Editors’ Picks

Omicron crypto surges over 200% after being named as new COVID-19 variant

While cryptocurrency prices retraced after the new coronavirus variant Omicron emerged earlier this week, the digital asset with the same name gained popularity and surged over 200%. The small-cap crypto describes itself as a decentralized reserve currency on the Abribtrum Network.

More Cryptocurrencies News

SafeMoon price dips into buy zone, hints at the start of an 80% bull run

SafeMoon price saw its uptrend face a massive blockade, triggering the start of a huge pullback. Due to the retest of a bullish zone, market participants can expect SAFEMOON to restart its bull rally. SafeMoon price rose 484% from its low at $0.00000104 to $0.00000609 in a month.

More SafeMoon news

Basic Attention Token bucks downtrend with explosive rally to new all-time high

Basic Attention Token has snubbed the crypto downtrend and hit a new all-time high above $1.90. Brave browser has crossed 42 million active users, and BAT token utility is on the rise. Analysts predict a rally in the token.

More Cryptocurrencies news

Vitalik Buterin announces Ethereum scaling roadmap using the Graph protocol

Ethereum co-founder Vitalik Buterin revealed a strategic roadmap to expand the available data space for rollups using Graph protocol. The token’s trade volume has increased, and analysts expect an upwards move in GRT price. 

More Ethereum news

Black Friday 2021 Discounts!

Do you want to take your trading skills to the next level? Now you have a chance of leaping forward at attractive introductory rates. For Black Friday, FXStreet is offering discounts of up to 50% on its upgraded Premium plans. 

Subscribe now!