The crypto market appears to have a lot of green shoots popping up and the sky-high speculation in Bitcoin futures contracts is one of them. Data from CoinGlass and Arcane Research show the nominal value of open interest in Bitcoin futures contracts has reached a yearly high of $12 billion, marking a 7% gain for the month. This is the first time the open interest for Bitcoin CME futures is nearing its all-time high since the collapse of FTX.
The surge in open interest is likely due to an increased appetite for risk assets and a “flight to quality” within crypto as bitcoin’s price has rallied 15%, to $28,439. Despite the price increase, professional traders have not opened more leveraged bullish positions on futures contracts, indicating there is more room for further growth.
A deeper look into the market data shows that the new money is betting on price gains, considering the funding rate or the cost of holding bullish long/bearish short positions has flipped into the green after spending most of the early parts of the Asia trading day in the red. Positive funding rates usually indicate a bullish trend, as long positions compensate short positions, while negative funding rates indicate bearish sentiment as short positions receive payment from those holding long positions.
The all-time record for open interest on bitcoin futures is from April 15 2021, when it hit $23.8 billion across all platforms. This is followed by $23 billion on November 10, 2021, which marked the end of the bull market. A Taipei-based trader at Quantrend Technology, a large market maker on Binance, told CoinDesk in a note that bitcoin has hit the highest level since the collapse of Luna last year, which is also a positive psychological indicator that market sentiment is optimistic.
The increase in open interest for Bitcoin futures could be the sign investors have been waiting for to indicate a further bull run in the cryptocurrency market. Bitcoin and CME Futures are recovering after the Q4 2022 slump and ether futures and options are also showing positive movements with the three-month futures trading at a premium of 0.6%. Total Bitcoin open interest on futures and perpetual contracts is around $9.7 billion, or 419,000 BTC, indicating there is room for further growth.
Given the market sentiment and sky-high speculation in Bitcoin futures, it is no surprise that investors have gained positive psychological gains. Hopefully, the crypto market will continue to climb and make good on the potential of these sky-high Bitcoin futures.