Speculation over Bitcoin ETF surges CME futures premiums

TL;DR Breakdown

  • Increased demand propels Bitcoin above $50,000, leading to higher futures premiums.
  • Likelihood of a Bitcoin Exchange Traded Fund believed to drive prices even higher.

The influx of institutional investors seems to be the reason why Bitcoin‘s price broke out slightly above $50,000. More buying leads to increased demand for BTC, which ultimately leads to an increased price.

Front-month futures in Chicago Mercantile Exchange (CME)  are now trading at 12.8% (annualized premium). According to Skew, a research firm specializing in derivatives, prices have reached the highest point in the last six months. It’s a slight rise (0.36%) growth compared to the one witnessed a week ago. 

Premium growth indicates that the demand for long-term investment in Bitcoin is rising among CME traders and institutional investors.

A weekly research note courtesy of Arcane’s Research stated that the recent front-month contract on CME is undoubtedly the most popular BTC futures contract traded on Chicago Mercantile Exchange. In the meantime, there are signs of bullish trends on big investors’ platforms.

CME similar to institutional investors

Analysts usually consider CME and institutional investors as the same. Institutions are large investors who wield a lot of influence, not forgetting the capital at their disposal. 

Institutional investors prefer to invest in futures using equally established outfits like CME, one of the world’s well-established derivatives companies. Besides, the capital outlay reqúired for such projects can only be sourced from institutional investors.

Bitcoin past week performance

In the past week, BTC rallied by over 10% was trading at around $50,650 level in the current week. The likelihood of a bitcoin-themed exchange-traded fund (ETF) approval is a significant factor driving the higher cryptocurrency market.

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 the main factors powering the cryptocurrency higher.

Crypto community hopeful of ETFs approval

On Monday, Nate Geraci’s tweet suggested that the first ETF listed in the U.S. will have been approved by the Securities and Exchange Commission in two weeks.

A senior ETF analyst at Bloomberg, Eric Balchunas, believes that this month’s futures-based ETF is 75%. Eric further noted that the approval of the ProShare Bitcoin Strategy is likely to be on October 18. Earlier this month, the SEC rejected three physically-backed BTC ETFs.

Matthew Dibb, the co-founder of Stack Funds, thinks that rumors of BTC ETF approval later in the month influence increased demand. Research analysts at Arcane have suggested that buying pressure on the front-month CME futures contract will increase once a futures-based ETF is approved.

This post was last modified on October 6, 2021 6:03 pm

Edith Muthoni

Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, cryptocurrencies, blockchain, and cryptocurrency investments.

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Edith Muthoni

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