“Significant impulse” seen in the futures as a sharp rebound of crypto “caught most investors by surprise,” more so on ETH, whose OI on CME has hit a new peak in USD, all the while on the back of low leverage. At the same time, the long USD continues to soar to new highs.
Bitcoin and Ether are recovering spectacularly from the losses recorded in the second half of May, the entire June, and much of July.
August is finally looking good after nearly three months of red, with BTC almost touching $48,000 on Friday and Ether climbing to $3,330. The total crypto market cap aims for $2.1 trillion, now closer to the $2.55 trillion peak from mid-May.
Interestingly, just like crypto-assets rallied into the end of 2020 to the 2017 ATHs, this time, prices are slowly moving towards their 2021 peaks without the high leverage. FRNT Financial CEO Stephane Ouellette said in an interview,
“Typically, we look at that as more of a strong-handed rally, which implies that the leverage portion of the rally comes later.”
“If that is the case, those $100,000 targets are very reasonable, I’d suggest. The last time we saw a move of this little leverage, we were pointing towards $20,000, and we didn’t really see the leverage come into the market in an aggressive way until we got to $40,000, which took us to $65,000.”
1/ Heading into the weekend we have flat funding, and Bitcoin hitting up against it’s 46k ceiling. The coiling here makes me think there’s good probability of a sized move coming soon.
— Avi 🦍 (@AviFelman) August 13, 2021
On Binance, BTC’s annualized daily basis is currently 3.56%, down from 41.4% in mid-April, which was a mere 0.2% in late March just before its peak. As of writing, the highest Bitcoin funding rate is 0.0240% on FTX while keeping around 0.1% on the majority of the crypto exchanges, as per Bybt.
As for ETH, it’s 3.72% (7DMA, APY), while in February, it was above 50% on Binance compared to 131% on Bybit and 113.7% on BitMEX. Currently, it is 21% on BitMEX and 3.72% on Bybit.
All the while, open interest on futures continues to climb; on Bitcoin contracts, it is $16.72 bln back to May levels. This OI is up 57.4% from the late June low and still down 39.6% from the April high.
As for Ether, OI is currently sitting at just above $9 bln, up 104% from late June low but down 22% from May high.
The CME’s marketshare in Open Interest has gone from 19% (Feb 20th) down to 11% (August 13th). pic.twitter.com/wlwC1HnPLj
— Zaheer (@SplitCapital) August 14, 2021
On CME, OI on Bitcoin futures is $1.71 bln, down from a $3.26 high on Feb. 21 but up from $1.14 bln on July 1st — accounting for 10.23% of the market share. Unlike BTC, on Eth futures, OI on CME has surpassed the May 14 peak of $607.88 mln to reach $648.5 mln — accounting for a 7.02% market share.
Traders on CME are also closing their short positions, which have hit their smallest since mid-May. Bitcoin net shorts have fallen to 1,104 contracts from 1,290 in the previous week.
Amidst this, US dollar net longs rose again to reach their highest level, $3.08 billion, since early March last year. US dollar positioning has been net long for four weeks in a row now after staying net short for 16 months. JPMorgan strategist Nick Panigirtzoglou wrote in his latest crypto report,
“There are clear signs of demand improvement in futures markets pointing to rising institutional demand for crypto. Momentum traders such as CTAs have likely amplified recent crypto price moves as the shorter lookback period momentum signals shifted from negative to positive territory for both bitcoin and ethereum. Typically this is when momentum traders’ impact is mostly felt as they are forced to exit short positions and start building up long positions.”
According to the strategist, the institutional buying of crypto has reversed and spiked after several months of muted activity.
This is because “the sharp rebound of crypto markets over the past three weeks caught most investors by surprise,” wrote Panigirtzoglou.
JPM now sees a “significant impulse” in the futures. They have now come around on backwardation as well, which they previously saw as a bearish signal. Back in early June, in contrast, trader CL of eGirl Capital had said that longing BTC every time it’s in backwardation has resulted in significant profits.
Now JPM is also arguing “that the previous phase of demand weakness is over.”