- Since their introduction earlier this year, spot bitcoin ETFs have helped the CME bitcoin futures market’s open interest rise by 80%, according to an expert.
- According to the researcher, basis trading between spot bitcoin ETFs and CME futures contracts has increased open interest by creating opportunities for arbitrage.
Because institutional investors are using spot bitcoin exchange-traded funds (ETFs) and the CME bitcoin futures market for basis trades, open interest has surged dramatically.
According to Gabriel Selby, principal research analyst at CF Benchmarks, spot bitcoin ETFs have helped the CME bitcoin futures market’s open interest rise by 80% so far this year.
Selby went on to say that this engagement from institutional investors may increase the liquidity of bitcoin and pave the way for a stronger, more integrated ecosystem of the market.
Record number of CME futures contracts following approval of the spot ETF
There are currently slightly under 18,000 bitcoin short contracts on the CME, according to data from CF Benchmarks (at a notional of about $6.3 billion). This is significantly more than the record of over 6,200 short contracts set before the spot bitcoin ETF was approved in October 2021, according to Selby.
Selby ascribed this rise to basis trading, which creates arbitrage opportunities by aligning price benchmarks between spot bitcoin ETFs and CME futures contracts.
Basis trading pressure on the current price of bitcoin
Due to arbitrage opportunities that result from trading the difference between the spot and futures prices, the current spot price of bitcoin could be under pressure.
When bitcoin is bought on the spot market, its price rises; when it is sold in the futures market, its price falls when the futures price is higher than the spot price.
On the other hand, when the futures price is lower than the spot price, purchasing in the futures market raises the futures price and selling in the spot market decreases the spot price.
However, because the spot and futures prices will eventually converge, arbitrage actions usually have a short-term effect on the spot price.
It is difficult to determine just how much spot bitcoin ETF is being utilized overall for the basis transaction, according to the CF Benchmarks analyst. The expert stated that it will be roughly in line with the $6 billion notional on the CME side.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
