Bitcoin ETF Approval to Induce 'Selling Pressure' on CME Futures: K33

• CME Bitcoin Futures Open Interest Peaks at $6.2 Billion Amid Spot ETF Approval Anticipation
• Record-High Open Interest Amid ETF Expectations
• Record-breaking surge in CME Bitcoin Open Interest
• K33 Research Forecasts Trend Reversal

CME Bitcoin Futures Open Interest Peaks at $6.2 Billion Amid Spot ETF Approval Anticipation

On Tuesday, the open interest for bitcoin futures at the CME hit $6.2 billion, signifying the mounting institutional stakes on the potential approval of a spot bitcoin ETF. However, K33 Research predicts this trend could abruptly reverse, leading investors to hastily close their positions if ETFs are given the green light.

Record-High Open Interest Amid ETF Expectations

Bitcoin$42,260 -0.64% (BTC) futures' open interest on the leading U.S. marketplace reached an all-time high on Tuesday. This surge is attributable to institutional investors increasingly engaging with the asset in anticipation of a spot bitcoin ETF approval. However, this trend may come to an end soon, as the SEC's approval could induce selling pressure, according to a note by K33 Research.

The open interest (OI) - active trading positions - for BTC futures contracts on the Chicago Mercantile Exchange (CME), the biggest BTC futures trading platform preferred by sophisticated market participants, soared to $6.2 billion or 132,900 in BTC terms throughout the day. Both are new record highs, according to data from CoinGlass.

Record-breaking surge in CME Bitcoin Open Interest

This record-breaking increase occurred as CME bitcoin OI almost doubled from 72,000 BTC in mid-October. Market participants are increasingly wagering on regulators allowing the first spot-based bitcoin ETFs, capable of directly holding bitcoin. The continuous inflows into futures-based bitcoin ETFs, such as ProShares' BITO, which hold BTC futures traded on CME, have also contributed to this surge.

In a bullish sign, CME's front-month futures contracts traded at a significant premium of 18.7% annualized to the spot price, according to TradingView data.

K33 Research Forecasts Trend Reversal

However, a Tuesday market report by K33 Research predicted that this trend won't sustain. The report forecasted that both the open interest and premium would drop dramatically if a spot-based bitcoin ETF is approved in the U.S.

The report highlighted that about 43% of the CME bitcoin futures contracts were owned by futures-based ETFs. As investors will probably shift funds to cheaper spot ETFs, futures funds will need to close their positions, causing both open interest and the premium to fall.

The remaining 57% of the contracts are held by active market participants, whose exposure grew by 128% - to approximately 75,000 BTC from 33,000 - over the past three months. Keeping these positions open is quite expensive at the current premium, K33 noted, predicting that some investors will aim to realize profits after the bitcoin ETF approval.

All else being equal, this structural rotation will lead to selling pressure, K33 analysts Anders Helseth and Vetle Lunde stated. CME's all-time high regime could rapidly approach an end.

Edited by Jonathan Stoker