Crypto derivatives rise in CME

The year 2022 has been an extremely difficult period for investors and traders who wanted to join the crypto bandwagon.

Last year saw high-profile crypto companies collapses completely, sending ripples through the market and wiping out billions of dollars worth of investment.

However, this bearishness has been turned into bullishness as the crypto market recorded recent highs, broke through crucial resistances and gave profits to investors.

But the latest market decline remained a cause for concern for investors. At the time of writing, CoinMarketCap notes that the market shrank by almost one percent today as Bitcoin (BTC) and Ethereum (ETH) fell due to recent negative macroeconomic events.

Despite the decline, however, trading volume on the Chicago Mercantile Exchange (CME) for crypto-based futures is soaring. This could be an indicator that smart money could flow into the crypto market very soon.

Crypto futures attract smart money

A recent one report by CoinShare showed a glimpse of the tough tide ahead with large capital outflows from the crypto market, adding to the general bearishness surrounding it.

However, derivatives – a financial product that derives its value from an underlying asset such as crypto – have performed quite well on the CME, the world’s largest market for derivatives products.

Based on data by The Block, it shows that calculations regarding investors and futures contracts have skyrocketed since the start of the year.

Large Open Interest holders of Bitcoin-based futures contracts has risen to a new all-time high of 115, up from the 2020 peak of 110 (see chart below).

However, one of the most notable metrics is the categories of traders who hold these large open interest rate futures.

Long positions held Bitcoin-based futures held mostly by asset managers and hedge funds.

Hedge funds are a surprise to appear on this list considering that almost a week ago capital outflows from large institutions plagued the market with negative sentiment. This could be a further sign that smart money is still interested in crypto.

This led to short positions to be dropped by the two trader categories with a significant decrease in short positions as the year started.

On the other hand, asset managers is still significantly more bullish than hedge funds in terms of net BTC futures positions.

BTCUSD currently trading at $21,710 on the daily chart | Chart: TradingView.com

Regulatory clampdown possibly the driving factor

US regulatory crackdowns on large centralized exchanges may have proved to be the driving factor behind this increase in trading volumes in the futures market.

Recently reports about the US Securities and Exchange Commission’s clampdown shows that the agency is keen to regulate the space.

With 2022 a fresh memory for both retail and institutional investors, the futures market could be a way to find regulation in an unregulated space like crypto.

– Featured image from Carnegie Mellon University