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Institutional Adoption of Bitcoin Rising as Futures Open Interest Booms and ETF Expectation is Cemented

Last Updated November 10, 2023 11:37 AM
Teuta Franjkovic
Last Updated November 10, 2023 11:37 AM

Key Takeaways

  • The crypto market’s transformation is propelled by significant institutional involvement.
  • Chicago Mercantile Exchange overtook Binance in Bitcoin futures open interest.
  • Bitcoin price jumped as institutional capital floods in.
  • Sentiment grows as optimism around potential BTC spot ETF approval rises.

Once considered niche and speculative, the cryptocurrency market has undergone a significant transformation in recent years, also gaining attention from big names in the financial world.

The influx of institutional investors into the crypto space has played a pivotal role in driving this evolution. Their involvement has not only bestowed legitimacy upon the industry but has also substantially contributed to the expansion of digital assets.

CME Tops Binance in BTC Futures Open Interest

Institutional interest is evident as the Chicago Mercantile Exchange (CME) surpasses Binance , emerging as the largest Bitcoin futures exchange. Founded in 1848 and currently under the control of CME Group, the American-based CME is a renowned derivatives trading platform primarily serving institutional investors.

Exchanges Open Interest ranking
Credit: Coinglass

Despite providing Bitcoin-based futures contracts since 2017, CME Group’s trading volume has consistently lagged behind that of significant cryptocurrency platforms, particularly Binance. But for the first time, the trading volume on the CME has eclipsed that of Binance and other big cryptocurrency exchanges like Bybit and OKX.

Data from Coinglass  shows that CME currently has an open interest of 108,900 BTC (approximately $4 billion) in Bitcoin futures contracts. In contrast, Binance holds an open interest of nearly $3.76 billion, equivalent to 102,760 BTC.

Exchange BTC Futures Open interst
Exchange BTC Futures Open Interest | Credit: Coinglass

Most people are optimistic about the approval of the ETF, which is expected in early 2024 but may happen as early as this month, according to some experts.

Trading company QCP Capital  further emphasized that a possible spot ETF for Ether was a potential catalyst for the cryptocurrency market’s rise in its most recent market commentary on November 10.

“While we expect the approval for a spot BTC ETF to be delayed till Jan 2024, a new narrative surrounding a spot ETH ETF should be enough fuel for animal spirits to take hold once again with crypto prices steadily grinding higher towards the end of the year,” it wrote .

Rising Institutional Interest Pushes Bitcoin Price

One of the most compelling signs that institutional interest has been a major factor driving Bitcoin’s ascent since the start of the quarter is the increase in CME’s open interest. The majority of this interest stems from conjecture over the possible authorization of the first spot Bitcoin ETF with a U.S. basis.

Market participants believe that a product like this would make Bitcoin more accessible to institutional investors as well as regular investors. The rising support from well-known companies like Fidelity and BlackRock validates Bitcoin as an asset suitable for institutions.

As excitement grew, Bitcoin surged to highs of almost $37,900 on Thursday, November 9. At the time of writing, the top cryptocurrency asset is trading at around $36,550 .

Bitcoin Expects Surge In Capital Inflows

A “torrent” of institutional money is expected to pour into Bitcoin in the lead-up to an exchange-traded fund (ETF) being approved in the US.

Dan Tapiero, the founder and CEO of 10T Holdings, has joined the optimists who predict a dramatic shift in the institutional adoption of Bitcoin.

The price action of BTC has responded in kind to the growing enthusiasm surrounding the possible approval of a U.S. Bitcoin spot price ETF.

Meanwhile, institutional tides are beginning to turn as BTC/USD reached 18-month highs. For Tapiero, the fact that CME surpassed Binance represents a turning point.

In the meantime, QCP Capital also cautioned  that a sequence of lower highs on Bitcoin’s daily relative strength index (RSI) values could indicate a cooling-off from the next round of highs despite the overall optimistic outlook.

The company said that it expects cryptocurrency prices to be sustained because the macro picture is now slightly better in the short term, and rate pause prospects are solid. Quick buys will be made on dips as FOMO traders attempt to board the train.

“However, caution is still warranted as we are at crucial resistance levels, and BTC is printing a triple bear divergence with the RSI which has been a reliable signal for momentum stalling,” it concluded .

Crypto Industry Awaits Legal Frameworks For Stability

There is a likelihood that governments and regulatory bodies will establish more defined frameworks for the cryptocurrency industry, addressing aspects like taxation, investor protection, and compliance with anti-money laundering (AML) regulations. This increased clarity is expected to foster a more stable and secure environment for both cryptocurrency enterprises and investors.

Anticipation grows regarding the escalating institutional interest in cryptocurrencies. The evolving landscape, marked by established financial institutions like banks and asset management companies entering the cryptocurrency domain, poses an intriguing prospect for how the industry gains broader legitimacy.

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