Analysts say CME Bitcoin futures open interest has surged 80% due to spot ETF-based trading.

Open interest is rapidly increasing as institutional investors use spot Bitcoin exchange-traded funds (ETFs) and the CME Bitcoin futures market for basis trading.

“Spot Bitcoin ​ETFs have contributed to an 80% increase in open interest in the CME Bitcoin futures market year-to-date,” Gabriel Selby, senior research analyst at CF Benchmarks, told The Block.

Selby added that this institutional investor activity could drive Bitcoin liquidity and “set the stage for a stronger, more interconnected market ecosystem.”

Number of CME futures contracts recorded after spot ETF approval

According to CF Benchmark data, there are currently less than 18,000 short-term Bitcoin contracts on CME (with a nominal value of approximately $6.3 billion). “This is well above the previous record of approximately 6,200 short-term contracts prior to the spot Bitcoin ETF approval in October 2021,” Selby said.

CME hits record number of short-term Bitcoin contracts following approval of spot Bitcoin ETF. Image: CF benchmark.

Selby attributed the increase to basis trading, which uses price benchmark adjustments between the spot Bitcoin ETF and the CME futures contract to facilitate arbitrage opportunities.

Fundamental Trading Pressure on Spot Bitcoin Price

Arbitrage opportunities between trading the difference between spot and futures prices could put pressure on the current Bitcoin spot price. When the Bitcoin futures price is higher than the spot price, buying in the spot market increases the spot price, and selling in the futures market lowers the futures price.

Conversely, if the futures price is lower than the spot price, selling in the spot market lowers the spot price, and buying in the futures market raises the futures price.

However, spot and futures prices converge over time, so arbitrage activity typically has a short-term impact on spot prices.

CF Benchmark analysts said it is difficult to say exactly how much spot Bitcoin ETFs are being used for primary trading. “On the CME side, it would be within the $6 billion notional value range,” the analyst said.

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