Analysis
May 7: The Traders' War... New vs Seasoned...
Bitcoin is now up close to 3% past 24 hours as it spiked through $9400 for a bit even as U.S. equities traded poorly, leaving me with the thesis that BTC is starting to break away from moving in lockstep with S&P 500 until and after the havling event. In fact, the 1-year rolling correlation between Gold and Bitcoin is nearing all-time high, so we could start seeing it behave more like Digital Gold.
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Bitcoin is now up close to 3% past 24 hours as it spiked through $9400 for a bit even as U.S. equities traded poorly, leaving me with the thesis that BTC is starting to break away from moving in lockstep with S&P 500 until and after the halving event. In fact, the 1-year rolling correlation between Gold and Bitcoin is nearing all-time high, so we could start seeing it behave more like Digital Gold.
CME-listed Bitcoin's open interest rose to almost $400 million yesterday, an all-time high. What does that mean? It basically signals that U.S. regulated institutions and retail (through their TD Ameritrade accounts) are pouring fresh capital into these futures contracts. Further evidence that retail is buying is that spot exchanges (i.e. Coinbase) generally show accelerated volumes while futures are not moving much. For example, neither the futures curve has steepened that much nor the term structure basis. Second, Square reported tremendous growth in Bitcoin purchases through their app.
CME-listed Bitcoin's open interest rose to almost $400 million yesterday, an all-time high. What does that mean? It basically signals that U.S. regulated institutions and retail (through their TD Ameritrade accounts) are pouring fresh capital into these futures contracts. Further evidence that retail is buying is that spot exchanges (i.e. Coinbase) generally show accelerated volumes while futures are not moving much. For example, neither the futures curve has steepened that much nor the term structure basis. Second, Square reported tremendous growth in Bitcoin purchases through their app.
We got the bull case. So what's the bear case? The bear case is that the % of open interest of CME vs the global open interest of all exchanges is 15%, which isn't exactly large. So we know the U.S. regulated traders and retail are in the recent fresh bulls vs leveraged and long-time/seasoned traders sitting on the sidelines. I wrote in my earlier notes that two reasons that may be holding leveraged and longtime traders back are as follows; (1) past two halvings were met with decline in BTC's price post-event, (2) fresh memories of 12-March crash.
Trade strategy this week? Stick to the same game plan; for those who heeded my advice in the past few notes on going long volatility through buying BTC calls, that has worked quite alright. In fact, a large player lifted 10,000 ETH 250 June calls yesterday. I would also start building some put positions if we do see BTC breaking higher to $10k or beyond. Gdluck and peace out.
All-time high in CME's listed Bitcoin futures open interest... U.S. regulated traders and retail are starting to build fresh positions, and likely are from the long side....
Rolling 1-year correlation between Gold and Bitcoin near all-time high.... Bitcoin back becoming digital gold?
Bitcoin Dominance edging higher, 69% will be a key level, so looks like we still have further room in BTC outperformance in the digital assets space...
Disclaimer
Opinions expressed are solely the analyst's own and do not express the views of Matrixport the company.
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