Bitcoin Futures Surge Could Signal Imminent Approval Of First U.S. Bitcoin ETF

A case of buy-the-rumor, sell-the-news appears to be all the rage in Chicago, home to the Chicago Mercantile Exchange Group (CME Group
CME
), the world’s largest regulated futures and options exchange. The rumor in question has been around for weeks and posits that the U.S. Securities and Exchange Commission (SEC) may agree to approve the creation of bitcoin ETFs if the latter use BTC futures contracts as collateral rather than spot bitcoin. 

Which brings us to the sudden rally in money deposited in bitcoin futures ‘open interest’ (OI) contracts since early September. Think of open interest as the money investors tie up to support the bets on market activity. CME data shows that as of October 12 there were 10,918 contracts in BTC futures OI, a boost of 72% over a six week period. While the contracts had been in the red since mid-February, they are now in the black relative to where it started the year.

As a recent Forbes report indicated, a relatively small number of commercial traders are playing a key role on the demand side reflected in the rising CME bitcoin futures OI. While the identity of these firms is protected by both the CME and by the CFTC reporting protocol, the manner in which they are tagged within CFTC Commitments of Traders report suggests they are corporations and non-US financial institutions with deep industry insight.


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