In a recent disclosure, Deribit chief commercial executive Luuk Strijers identifies several market movements behind the decline witnessed on the Chicago Mercantile Exchange (CME) for Bitcoin futures open interest.
CME Suffer $1 Billion Decline
Strijers reports that the Chicago Mercantile Exchange saw the Bitcoin futures open interest plunge by over $1 billion. The decline traces to the peak realized on January 10 when the US Securities and Exchange Commission approved 11 bids for spot Bitcoin exchange-traded funds (ETFs).
The decline suffered by CME coincides with the uptrend momentum portrayed by derivatives open interest witnessed on Deribit. Strijers noted that the plunge in CME futures for Bitcoin contrasts the relative stability in Deribit’s Bitcoin options and futures’ genuine interest.
Strijers disclosed that Deribit has witnessed a 3% rally in the Bitcoin options open interest. The rally spreads across contracts, futures, and perpetual, translating to $100M since the Gary Gensler-led SEC approved the spot Bitcoin ETFs on Wednesday, January 10.
Reviewing CME and Deribit Differences Arising From Open Interest Trends
The Deribit’s head of commercial executive interpreted the declining trend witnessed on CME’s open interest as indicative of underlying market movements.
The decrease in the CME futures open interest suggests that the investors, particularly those hailing from the conventional finance sectors, are adapting unique investment strategies.
The unveiling of spot ETFs will likely attract investors who may find the spot ETFs straightforward to establish exposure to the cryptocurrencies. Strijers explained that the spot ETFs portray an efficient channel for traditional investors eyeing exposure to Bitcoins.
The commercial executive indicated that ETFs ease trading processes while attracting lower costs, unlike the case with futures contracts. He added that the two factors persuaded the investors to portray the sudden market behavior apparent since the spot Bitcoin ETF approval.
Market Activity Portrays Declined Volatility
Strijers indicates that the January expiry date for outstanding futures and options contracts is critical. He considers an estimated $3.7 billion worth of Bitcoin options in open interest expiring at the maximum pain level of $41,000.
Strijers indicated that the market approached the options expiry exhibiting signs of recovery from the initial shocks. The commercial executive attributed the shocks to the ETF unveiling and unwinding of GBTC.
Strijers reported the decline of the Deribit Volatility Index (DBI) for Bitcoin following the sizable uptick after listing spot Bitcoin ETFs on January 11.
Strijers disclosed that the DBI plummeted from 70 registered at the start of the ETF unveiling and GBTC unwinding to hover around 45. The decline replicates in the Bitcoin annualized futures basis that Strijers considered a critical metric,
Strijers highlighted that the annualized futures basis stood above 20% before the ETF unveiling. The figure nosedived to a range of 8-10%. He considers that the basis involves the rate indicative of variance in the bitcoin futures and spot prices.
Strijers explained the market movement as caused by investors attaching more value to utilizing the options on the Deribit platform for hedging and speculative purposes. The commercial executive attributes the relative stability witnessed on Deribit as suggestive that non-US investors rely on options in their diverse risk profiles and strategic purposes.
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