The trading of Bitcoin and Ether futures on CME remained elevated in the second quarter, with daily open interest hitting all-time highs.
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The absence of a CME Bitcoin futures premium, unrelenting record-high inflation and investor concerns over the economy are all factors weighing on BTC price.
Decline In Ethereum Futures On CME Suggests Institutional Investors Are Still Bearish
Institutional investors have been bearish toward Ethereum for a while now. There have been outflows rocking the digital asset until it ended its 11-week streak with inflows for last week. However, this does not mean that positive sentiment had returned entirely to the cryptocurrency once more. The numbers on the CME show that institutional investors remain wary and even bearish toward the second-largest cryptocurrency in the market.
Ethereum Falls Into The Negative
The Ether futures on the CME have been trading on a negative basis lately, which basically means they are trading below spot. This has caused the Ether Futures on the come to decline to the lowest they have ever been since inception.
The Ether-denominated open interest on the CME had previously claimed a new all-time high back in April. But since then, has continued to decline, with more drops recorded over the last weekend. This has spelled a bad streak for the month of June.
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As the month draws to a close, the three-month Ether basis has now decoupled from bitcoin and has been trading below spot, which had been recorded on June 23rd. Hence marking the first time that the Ether basis would ever decline so low.
ETH futures on CME in decline | Source: Arcane Research
Asset managers have now moved to a predominantly bearish stand following this. It has been recorded that they have been net short on Ethereum since mid-June when it stood at $37 million. This number has since dropped but only slightly to be resting at the $32 million that was recorded last week. The Ether futures basis is now sitting at a -2.33% while bitcoin remains at 0.63%.
ETH Struggles To Hold $1,000
The bearish sentiment towards Ethereum has not been relegated to just institutional investors alone. The spot markets are also feeling the heat as sell-offs have resumed. In light of this, the digital asset has had a hard time holding the $1,000 level.
ETH struggles to hold above $1,000 | Source: ETHUSD on TradingView.com
This level is significant for Ethereum due to the fact that there is support mounting here. However, it is a very critical technical level given that if the price were to decline below this point, resistance would quickly build up around it. Any support below $1,000 is incredibly weak, so a dip from here would likely see the price touch $800 before there is any recovery.
Related Reading | Ethereum Plugs 11-Week Bleed, why $1,500 May Be On The Horizon
Ethereum is now trading firmly below its 20-day moving average which has wiped out all hopes for a bullish recovery in the short term. Additionally, as the 3AC liquidation comes into focus, the implications for digital assets such as ETH remain very negative.
Featured image from Admiral Markets, charts from Arcane Research and TradingView.com
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Bitcoin Futures Bull Div Could Offer Crystal Ball Into Next Leg Up
The Chicago Mercantile Exchange more commonly referred to as CME, offers the de-facto futures contracts for Bitcoin since the end of the last bull market. But could the forward-looking price action also offer a potential glimpse into the future of what’s to come?
If this crystal ball works, the last leg up could be about to begin, and it could start with a simple bullish divergence.
Seeing Into Bitcoin’s Future With CME
CME is the top BTC futures exchange for institutional traders, and often a dominant force in the market. So dominant, that if any gaps are left behind over the weekend on the CME chart after the trading desk goes offline, they often get filled within the next week with a high degree of accuracy.
These sort of breakaway gaps are common with speculative assets like Bitcoin and other cryptocurrencies. Not all such gaps eventually get filled, but their importance is undeniable.
Related Reading | How Futures Traders Could See The Bitcoin Selloff Coming
Recently, the CME chart has begun to diverge ever so slightly from the price action on spot exchanges, enough to take notice. Just recently, a lack of a momentum crossover on the daily timeframe led to a nasty fakeout while CME was offline. The bullish crossover never existed on CME, so there was less bait for institutions to fall for.
Now, the CME futures platform could be offering a potential future look at the next leg up.
CME is showing a bullish divergence and a potential break of momentum | Source: BTCUSDT on TradingView.com
Last Leg Of Bull Run Begins With Flag To $82,000
There is yet another divergence to be seen on the CME BTC futures chart – a bullish divergence on the daily RSI, that closely matches the signal that sent Bitcoin flying last September.
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A corresponding downtrend on the LMACD – depicting downward momentum – is waiting to be broken. If a similar breakout of momentum is to follow, the final leg up of the bull market could follow.
This potential bull flag has a target of $82,000 | Source: BTCUSDT on TradingView.com
These signals on their own prove very little, and divergences are only confirmed in hindsight. However, the massive bull flag with a target of $82,000 could eventually act as all the proof necessary.
A breakout of the bull flag pattern still could come with several retests of the top trend line, so more sideways is possible before upside ever materializes. Of course, given how extreme the recent selloff was and the still lingering fear due to Evergrande, the recent bounce might not be as bullish as crypto holders would hope.
Follow @TonySpilotroBTC on Twitter or via the TonyTradesBTC Telegram. Content is educational and should not be considered investment advice.
Featured image from iStockPhoto, Charts from TradingView.com
How Futures Traders Could See The Bitcoin Selloff Coming
Part of what is so special about Bitcoin is the fact that is it inclusive to all, and never in the past required the participation of “smart money” and institutional traders. But to become a multi-trillion dollar asset as it is destined to, bigger players had to get involved to take things to the next level.
That next level is now here, and retail investors and traders are in the same market along with whales, corporations, and other high wealth individuals. These elite play in their own ball field, complete with their own set of rules and conditions. Some conditions can be so unique, that it can even help these traders avoid muddied signals coming from retail trading platforms. Here is how that all works.
The Great El Salvador Bitcoin Bull Trap
Bitcoin has been trading actively for more than a decade, and the network itself active for slightly longer. When it first released, it had no value at all. Today, it trades for $46,000 per coin, which has the cryptocurrency’s total market cap hovering just under one trillion dollars.
Growing from nothing to pennies, to a trillion dollars in value, is nothing short of amazing. Even greater of a milestone yet, was what happened yesterday when Bitcoin became legal tender in the Latin American country of El Salvador.
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Rather than soaring sky high as the retail crowd would expect, whales bought the rumor, but sold the news and took out stop losses of overzealous retail traders in the process. How was it that retail was so easily duped, but institutional futures traders were not? It could come down to the unique technical at the Chicago Mercantile Exchange, better known as CME Group.
Retail traders on Coinbase were bull trapped | Source: BTCUSD on TradingView.com
How CME BTC Futures Tipped Off Institutional Traders
When BTC Futures made their debut on CME in 2017, it was the end of the previous Bitcoin bull run. Institutions made it clear then that cryptocurrencies weren’t yet ready, and shorted the coin to the ground. And it was the first time outside of unregulated derivatives markets that institutional traders could do so. It caused a bear market as a result.
Since then, the power of the CME platform has controlled much of crypto price action. So-called breakaway gaps left on CME charts are often filled later in the week. These gaps are left behind, because the Monday through Friday trading desk actually closes down for weekends and holidays – in contrast to the always on markets of Coinbase or Binance.
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In the comparison between the two charts above, even technical indicators on the CME Futures chart on the left doesn’t exhibit the same bull trap situation. On the evening that Bitcoin was due to become legal tender, the LMACD indicator crossed bullish on the Coinbase chart (pictured on the right), suggesting that a bigger move up was essentially confirmed.
But on the CME chart, no such crossover occurred, which was telling of whales’ next moves. The momentum had long crossed bearish, but was waiting for price to react. React it did, and Bitcoin price flash crashed by $10,000 and nearly 20% due to the severe liquidations seen across the crypto space.
CME traders could have easily seen this coming, given the fact their chart never had a bullish signal to trap retail traders.
Follow @TonySpilotroBTC on Twitter or via the TonyTradesBTC Telegram. Content is educational and should not be considered investment advice.
Featured image from iStockPhoto, Charts from TradingView.com
Institutional Investors FOMO For Ethereum Exposure
Ethereum trends show it’s becoming more valuable as ETH 2.0 draws near. Thus, institutional investors are clamoring to get in on the action before it is too late. A signal for this has been ETH Futures have been trading at a higher basis premium than BTC Futures on CME. ETH Futures have continuously traded at a higher rolling basis than BTC Futures for the past three months. This could show that institutional investors are more bullish on ETH’s future in comparison to BTC. But other factors have also led to the ETH Futures trading so high.
Related Reading | Ethereum Fee Burns Clocks $100 Million, Here’s Why The Burn Is Important
ETH Futures on CME have only been live for February. This means that the market has not yet had time to adjust to market conditions. Whereas in the case of BTC Futures, investors have been trading on them for the past four years on CME. So the market has had more time to get used to the market conditions surrounding BTC Futures, along with established setups to utilize cash and carry trades in the most efficient manner.
ETH Futures basis higher than BTC Futures basis | Source: CME Crypto Futures 3-Month Rolling Basis from Arcane Research
ETH Futures being just six months old has not given the market much time to establish the same patterns with BTC Futures. The ETH futures are still evolving and investors are trading in a mature which is yet to mature. But this has started to change.
Institutional Investors Need More ETH Exposure
ETH Futures experienced high basis premiums at launch, which most likely was due to institutional investors using the ETH Futures on CME as a way to get more exposure to ETH. But as time moved on, the ETH Futures market has continued to mature. ETH Futures’ basis saw a declining trend as more trading firms take advantage of the CME to carry out cash and carry trades. Following the same trend on the BTC basis.
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The passage of time has however seen this contango grow from the lows. A spike saw the BTC basis shooting up, before finally stabilizing at around 3%. While ETH basis saw an even higher spike, which had eventually stabilized at 7%. ETH Futures have remained in an uptrend in the weeks following the spike to the current position.
This higher climb in the ETH basis than the BTC basis shows that institutional investors are currently more bullish on Ethereum compared to Bitcoin. Basis trends between the two futures put Ethereum on a higher trajectory than its Bitcoin counterpart.
Ethereum Institutional Interest Showing In Price Movements
The CME ETH Futures are not the only indication that institutional investors are showing more interest in Ethereum. Price movements in ETH also indicate more interest in the asset over pioneer cryptocurrency Bitcoin.
ETH’s price is up 240% in 2021 alone | Source: ETHUSD on TradingView.com
ETH’s price has outperformed the price of Bitcoin this year by over 200%. While the performance for Bitcoin for the year 2021 sits at less than 38%, ETH’s performance is up 240%. This disparity in performance shows investors are moving more towards Ethereum. Leading to the high growth in price compared to BTC.
Ethereum network continues to expand its use cases with the upgrade to ETH 2.0. It is the leading network for DeFi and NFT development. Its TPS is higher than that of Bitcoin, and the move to proof of stake will cut down the network’s energy usage by 99%.
Featured image from The Cryptonomist, charts from Arcane Research and TradingView.com
