What is behind the surge in Bitcoin futures trading volume and open positions?

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On October 12, Binance’s Bitcoin price (BTC) broke through $11,700, and data showed that trading on derivatives exchanges also began to soar.

According to Skew’s data, the open positions of CME Bitcoin futures have begun to rebound. Open interest refers to the total amount of long and short contracts that are open at a specific time. This is usually used to evaluate trading activities in the futures market.

CME Group Bitcoin Futures Trading Volume Source: Skew

Other institution-centric platforms, including LMAX Digital and Bakkt, also have high daily trading volumes. This shows that after Bitcoin’s strong rebound, the size of institutional transactions is increasing overall.

What is behind the surge in futures trading volume?

In the past two months, three companies with a market value of billions of dollars have publicly announced large-scale investments in Bitcoin.

First, MicroStrategy, a US company listed on Nasdaq, said it has invested $425 million in Bitcoin. The company said it will use Bitcoin as its main asset, essentially to hedge against inflation.

Then Square, a payment group with a market value of US$81 billion, made a US$50 million investment. According to reports, Square allocates 1% of its investment portfolio to Bitcoin, which shows the potential for long-term growth of Bitcoin.

According to Cointelegraph, on October 13, Stone Ridge, a $10 billion asset management company, purchased 10,000 BTC. The company is now the third major U.S. company to invest heavily in Bitcoin in the past two months.

With MicroStrategy, Square, and Stone Ridge’s high-profile investments in Bitcoin, institutional demand for Bitcoin may naturally increase. The Skew researchers said:

“As arbitrage trading resumes, the open positions of CME Bitcoin futures are picking up. We can take a look at the COT report this weekend to learn more about potential shorting of leveraged funds.”

Digital Assets Data’s Bitcoin futures data also shows that Bitcoin trading volume has increased significantly in the past two weeks.

比特币期货交易量和未平仓头寸激增的背后是什么?

BTC futures trading volume on the exchange Source: Digital Assets Data

CME Bitcoin futures open positions have recovered after expiration in September. The CME monthly futures contract expires on the last Friday of each month. Since the futures market will restart after each expiration, the open interest will also drop.

However, the overall increase in transaction volume on various institutional platforms indicates that institutional demand may rise.

Over-the-counter transactions between whales may also increase

Whalemap researchers said that since the beginning of October, over-the-counter transactions between whales have been increasing.

Whalemap, a platform that tracks whale activity and transactions by high-net-worth investors, has found that personal transactions have increased significantly, especially before and after major news announcements. they said:

“I am looking forward to seeing more over-the-counter transactions, and it is true. I am increasingly inclined to the view that before the news is released, you can see these over-the-counter transactions are happening on the chain.”

While the activities of institutions and whales are active, the total transaction volume of the spot market is also increasing.

比特币期货交易量和未平仓头寸激增的背后是什么?

Daily cumulative BTC spot trading volume Source: Skew

In an uptrend, high spot trading volume is critical to maintaining the upward momentum, because it shows that retail investors are genuinely interested in Bitcoin.