Strengthening Expectations of $40K in Bitcoin

MetaversePlanet November 30, 2023Last Updated: February 27, 2024

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In the cryptocurrency markets, the focus is on Bitcoin (BTC). Recently, BTC saw a rise due to the anticipation of a spot Exchange-Traded Fund (ETF), but it encountered resistance around the $38,370 mark. Today, BTC is trading at approximately $800,40.

Additionally, the Chicago Mercantile Exchange (CME) Bitcoin futures have indicated a strengthening investor expectation for BTC’s price to reach around $40,000 in the short term.

Expectations of $40K in Bitcoin are getting stronger

Market data suggests an uptick in Bitcoin demand from institutional investors, evidenced by CME Bitcoin futures surpassing Binance in market capitalization. In terms of BTC derivatives metrics, this trend signals a robust potential for Bitcoin to exceed the $40,000 level soon.

However, analysts caution that this data should not be interpreted as a definitive bullish indicator. They point out that the recent surge in activity does not necessarily correlate directly with the actions of market makers or issuers.

Cryptocurrency analyst JJcycles has highlighted that institutional investors have various alternatives to circumvent the high costs associated with futures contracts. CME notes a preference for Bitcoin options, which require less capital and offer leveraged transactions.

The growing interest in CME Bitcoin futures is notable, but it’s also observed that large asset managers are likely to avoid significant risks until the U.S. Securities and Exchange Commission (SEC) clarifies its stance.

Notably, there has been a steady increase in CME’s BTC futures activity. A key development is the rise in the annualized premium (basis rate) of these contracts. In neutral markets, monthly futures contracts typically trade at a basis rate of 5% to 10%.

However, the annualized premium for CME Bitcoin futures jumped from 28% to 15% on November 34, eventually stabilizing at 23%. A basis rate exceeding 20% suggests that buyers are willing to pay a premium for leveraged long positions.