The trading volume of Bitcoin futures contracts has continued to rise recently, hitting new highs. The average daily trading volume of CME Group reached 66,000 contracts, an increase of nearly 50% month-on-month.
A Bitcoin futures contract is a derivative similar to a traditional futures contract in which traders agree to buy or sell a certain amount of Bitcoin at a specific price. Futures contracts allow traders to speculate or hedge against losses. Hedging is a common method used by miners to effectively cover operating costs.
As of this month, open interest has reached approximately $4.6 billion and rose to approximately $6 billion on the day the Bitcoin ETF received approval from the U.S. Securities and Exchange Commission (SEC). This shows that traders have a lot of interest in Bitcoin futures trading and ETF investment.
JPMorganâs Nikolaos Panigirtzoglou pointed out in a report that the launch of spot ETFs may deepen the cryptocurrency market and further promote the development of derivatives trading. He believes that the emergence of spot ETFs introduces a new dimension to the Bitcoin price discovery process, which echoes the role of ETFs in stock trading in the traditional financial system.
But while high trading volumes suggest that ETFs may be sparking more mainstream investor interest in cryptocurrencies, the heavy volume of futures trading is more about arbitrage opportunities from Bitcoinâs price swings. Traders often employ a âcash and carryâ strategy, selling Bitcoin futures contracts at a premium while holding the underlying cryptocurrency. As these prices get closer as the contract expiration date approaches, the trade can deliver substantial returns with low risk.
Because of this, since the adoption of the Bitcoin spot ETF, the market has fallen into a selling vortex, and the initiator was none other than the Grayscale Bitcoin Trust Fund (which was once one of the largest Bitcoin capital pools in the world) holding more than 630,000 Bitcoins. GBTC).
After switching from a closed-end fund to a spot ETF, GBTCâs BTC storage (which accounts for 3% of the total 21 million Bitcoins) lost more than $4 billion in the first 9 days of ETF trading, while other ETF participants lost funds during the same time period. Inflows were approximately $5.2 billion. As can be seen from the table below, funds are still in a state of net inflow, but from a market perspective, the price of BTC is still falling since the SECâs approval. There are still many doubts about where the net inflow of US$824 million will go.
A massive outflow of funds has put Bitcoin in trouble as well. The coin has experienced significant volatility in the weeks since the SEC approval, falling below the key $40,000 threshold last week and essentially trading at the same level it was at the beginning of the month. This volatility suggests that the Bitcoin market has been affected by ETF selling pressure.
While ETFs remain the main driver, they are not the only ones. Investors are still watching how macro factors affect prices. Especially in the critical week when the Federal Reserve is about to release an interest rate decision, the price of Bitcoin began to rise yesterday evening and reached around $43,800 today, laying the foundation for a new round of volatility. Investors are almost certain that the Federal Reserve will keep interest rates steady, and lower interest rate policies may boost overall risk-taking and the technology industry, which are positive factors for the Bitcoin market.
Another piece of good news is that the financial market has begun to report that American financial giant Charles Schwab is about to get a share of this business. It is understood that Charles Schwab Group, located in San Francisco, California, is the largest online brokerage in the United States. Founded in 1971, its asset management scale has reached US$7.13 trillion and its market value has reached US$116.7 billion. It provides brokerage, banking and financial advisory services. Has comprehensive experience and the ability to handle a variety of Exchange Traded Products (ETPs).
Because of this, the addition of Charles Schwab Securities has become a target of extreme concern among market analysts. Eric Balchunas, a senior ETF analyst at Bloomberg, said that donât ignore Charles Schwab Securities. Although they may not be the first company in the market to offer Bitcoin ETFs, with their ultra-low fees and large number of active brokerage accounts, they have the ability to significant impact on the market. Balchunas speculates that Schwab Securities may launch a Bitcoin ETF product with a 0.1% fee in the next few months.
Morningstar analyst Bryan Armor also believes that this strategy is in line with Charles Schwab Securities' operating style. He noted that Schwab has adopted a unique strategy in product development, focusing on a well-thought-out product mix, which has helped them remain competitive in the long term. Nate Geraci, co-founder of the ETF Institute, also agreed with Eric Balchunasâ point of view and believed that Charles Schwabâs entry into the Bitcoin ETF race would happen sooner or later.
Summarize
Overall, the continued move higher in the Bitcoin futures contracts and ETF markets and the addition of Charles Schwab Securities have attracted widespread attention. Investors are eagerly awaiting more choices and more opportunities to participate in the cryptocurrency market. However, as the market develops, investors should remain alert and conduct sufficient research and risk assessment before participating in investments. Only through rational decision-making and scientific strategies can investors obtain long-term returns in this exciting market.
