Digital Currency Revolution Series: A Run Through on CME BTC Futures Price, Volumes and OI

Bitcoin futures price (BTCV2019) has been revolving around $8,200 – $8,300 levels from the last couple of days.

The underlying price (BTCUSD at Coinbase) is also consolidating at around 21SMA levels.

Yesterday, BTCV2019 shows break away gap at $8,255 levels as you can observe on daily and intraday plotting as well, break away gaps usually occur with heavy volumes, volumes have risen here.

Observe histogram and rising volumes curve at this juncture as the institutional interests have mounted with bullish sentiments, as evident from the increasing number of investors going long on CME’s Bitcoin Futures contract. 

Open interest in CME Bitcoin Futures has dipped (refer 3rd and 4th exhibits).

Volume and Open Interests would usually be tepid at the early stages of futures contract life and expands as it reaches the maturity period and again drop during close to expiration stage.

Most importantly, please be advised that for trading purpose, abstain from lower volumes and lower open interest.

Hence, we advocated directional strategy using calendar spreads when spot reference levels were at $8,299, as we expect BTCUSD to slide further over the next month or so, wise to sell BTCV9 contracts at current level and simultaneously buy CME futures of December delivery at the same level. We wish to uphold the same strategy for now. Please be noted that the short-leg requires initial margin per spread. 

The rationale: One can foresee the short contract to increase comparatively more than the long leg, expanding the value of the spread and generating considerable yields. A bear calendar spread is a more conservative position that is less volatile, requiring less margin to set up than a one-leg futures position, and this is a significant advantage of the spread trade. This lower margin requirement allows the trader to achieve a higher return on capital.