CME Bitcoin Futures Open Interest Soars, Institutions Look at BTC as Inflation Hedge

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by Bhushan Akolkar · 3 min read
CME Bitcoin Futures Open Interest Soars, Institutions Look at BTC as Inflation Hedge
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The open interest for CME Bitcoin Futures has surged over 100% over the last month as concerns of inflation drive institutional players to the crypto market. Institutions see BTC as a good hedge while the central banks continue to add more money to the ecosystem.

Chicago Mercantile Exchange’s (CME) Bitcoin futures see rising institutional interest as more investors turn towards Bitcoin to hedge potential inflation risks. The CME Bitcoin Futures open interest has topped $800 million making it the third-largest by open contracts.

Also, with this CME contributes 15% to the total global open interest of $5.2 billion. OKEx dominates the first position with a 23% share followed by BitMEX at second with an 18.6% share.

Over the last month, this open interest for BTC Futures has jumped a massive 120% from a low of $365 million in July. CME launched its Bitcoin futures contracts in December 2017 when Bitcoin was trading at its all-time high. Just like any other futures contracts, Bitcoin Futures allow investors to buy and sell BTC at a predetermined price in the future.

Well, it is a clear sign of rising institutional interest in the world’s largest cryptocurrency. Besides, what attracts institutional players to CME is that it is completely regulated by the CFTC. Chris Thomas, head of digital assets at Swissquote Bank, told CoinDesk:

“It’s a norm – institutions understand each part of the trade cycle when trading on the CME and don’t have to set up new processes to manage risks that they would have to while buying physical bitcoins”.

Institutional FOMO Triggered?

As the global economy remains under the dark clouds of COVID-19 pandemic, institutions are looking for a good asset class to hedge their risks. This week, the crypto market saw a good amount of institutional participation.

Earlier this week, Nasdaq-listed firm MicroStrategy purchased over 20,000 BTC worth $250 million. The company called this investment as part of its new “capital allocation strategy” for long-term investors. This shows that amid the global market uncertainty, investors and businesses are ready to build positions in Bitcoin and other cryptocurrencies. Moreover, as the Fed and other central banks continue to print more money, institutions see BTC as a good inflation hedge. Speaking to Decrypt, Charles Bovaird, vice president of content at Quantum Economics, said:

“Open interest in Bitcoin futures trading on the Chicago Mercantile Exchange surpassed $800 million earlier this week, representing a more than 100% increase from $365 million in July. This development is a strong signal of the rising demand of institutional investors. As for why they are more interested than before, I feel as if digital assets and blockchain technology are becoming increasingly mainstream.”

“Governments around the world are working to create central bank digital currencies, a development that has been accelerated by the proposed Libra project and the visibility it has generated”, added he.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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