Academy Trading Ideas Article

CME Open Interest Pushes New Highs as Bitcoin Decouples From S&P 500: Crypto Market Daily

2020.05.19

As of press time (11:00 UTC), Bitcoin (BTC) is trading near $9,800 and is up 1.69 percent over the last 24 hours, per OKEx’s BTC Index Price

Large-cap cryptocurrencies are underperforming against Bitcoin. Ethereum (ETH) and Bitcoin Cash (BCH) gained 0.91 percent and 0.95 percent, respectively. 

OKEx Token Index Board (as of 11:30 UTC). Source: OKEx

Bitcoin looks to further decouple from the U.S. stocks

In the May 14 edition of Crypto Market Daily, we noted that the United States stock market made a huge retracement. Meanwhile, the price of Bitcoin kept showing bullish momentum. The day marked a significant decoupling of BTC from stocks in two months. 

This Monday, we seem to have seen a more pronounced decoupling. From the chart below, comparing OKEx BTC/USDT spot price vs. S&P 500 E-mini, the two no longer seem to interact at all. 

BTC vs. S&P 500 5Min Chart. Source: TradingView

The S&P 500 climbed 3.2 percent on Monday — its best day since April 8 — boosted by optimism surrounding a COVID-19 vaccine and more bailouts. Bitcoin, meanwhile, lost 1.56 percent during the day. This morning, the S&P 500 made a correction at the same time BTC started to pounce higher. 

The 90-day correlation between two assets has declined from its May 17 peak of 0.598 to its current 0.482, as per Coinmetrics data

Clear signs of Wall Street entering the Bitcoin market

Over the last months, we have seen significant growth in terms of Open Interest (OI) in the CME Bitcoin futures market. As of today, CME accounts for $517 million in total OI — occupying third place across the futures market, per Skew’s data. The top two are OKEx with $788 million and BitMEX with $754 million. 

Furthermore, over the past week, CME options open interest rose to its highest level ever — nearing $150 million.

If we look back at the data on Feb. 18, CME only had $329 million in OI, compared with OKEx’s 1.3 billion and BitMEX’s 1.6 billion. Since the aggregated OI has fallen sharply after mid-March, the growth of CME OI is more unusual — now with more than 15 percent of the aggregated OI, as of today. 

The growth may indicate that Wall Street fund managers have entered the Bitcoin market after the market crash. Not only did Paul Tudor Jones announce his exposure to crypto, but we have found more institutional investors coming one after the other. 

BTC Futures — Aggregated Open Interest. Source: Skew

Moreover, CME investors look more bullish than retail, at the moment. When we compare CME June-expired future price and OKEx quarterly future price (BTCUSD0626), the CME premium is more than $60 over the OKEx June contract. 

CME June contract (Blue) vs. OKEx Quarterly Futures (Orange). Source: TradingView

Bitcoin Technical Analysis

BTC has been trading in a narrow range since last Thursday’s rally and retracement. From a short to mid-term view, the overall trend is still in the control of the bulls. 

OKEx BTC Quarterly Futures (BTCUSD0626) 4H chart. Source: OKEx

Technically, the important support in the short-term is $9,280, while $8,550 is the key level for the mid-term, per OKEx BTC Quarterly Futures (BTCUSD20200626) price. A key resistance level is $10,200. 

For intraday trading, chasing for the price in an uptrend may prove risky, since it is easy to buy at a session high. 


Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.


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