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Bitcoin on the CME: Market Movements and Analysis

·5 minuto per la lettura

Bitcoin Futures: Harnessing the Power of Speculation

Source: StockCharts BTC/USD
Source: StockCharts BTC/USD

The CME Group allows traders and investors to exercise options on BTC futures, for hedging purposes. Bitcoin derivatives trading with CME options is increasingly popular, with many benefits, including substantial cost savings, risk mitigation, full transparency and efficient price discovery.

Source: CME Group Bitcoin Volume
Source: CME Group Bitcoin Volume

The average daily volume of CME Bitcoin futures trading is steadily increasing, from a low of 6,792 in January 2018 to 26,154 by December 2019. The average daily trade peaked in May 2019 at 68,020. The Chicago Mercantile Exchange recently ranked at #3 in terms of the number of open contracts on Bitcoins futures, behind the OKEx and BitMEX.

By leveraging the volatility of BTC, without actually owning the underlying asset, traders and investors can dabble in cryptocurrency markets with relative ease. This type of speculation is integral to the pricing mechanisms of Bitcoin, with investors locking in prices now, uncertain of what the future may bring. Any number of factors can increase or decrease pricing at a later date.

Since Bitcoin futures operate on regulated exchanges like the CME, CBOE, and Bakkt, courtesy of the CFTC (Commodity Futures Trading Commission), this provides far greater security to traders and investors than bitcoin exchanges which have been known to collapse overnight. There is no need for cryptocurrency-friendly software, or Bitcoin wallets for trading purposes – all settlements are made in cash.

Source: Volatility Index
Source: Volatility Index

Bitcoin futures trading is predicated on an in-depth analysis of the technical and fundamental factors, including the use of Bitcoin charts. It is necessary to conduct an in-depth technical analysis of Bitcoin price to facilitate a better understanding of likely demand, and pricing mechanisms. Another important technical indicator is the Bitcoin Volatility Index (BVI)

which evaluates how the price fluctuates relative to the spot price. Currently, the BVI is low, indicating stability in prices which bodes well for the elevated price level.

Current Performance of Bitcoin

The price per unit BTC has steadily been increasing since May 2020. The 200-day MA is priced at $8,992.61, while the short-term 50-day MA is trading at $10,446.43, indicating a significant upside movement over the short-term. Given the spot price of Bitcoin at around $11,800 per unit (August 20, 2020), the momentum is certainly on the side of the bulls.

Significant volatility in the global financial markets, spurred by the coronavirus pandemic has driven interest in safe-haven assets such as gold, and massive multi-trillion dollar stimuli by the US, and European countries are drumming up interest in Bitcoin.

Large-scale numbers of retail investors are now switching their attention to cryptocurrencies, and this is evident in the sharp rise in pricing across the board. A key technical indicator of expected price movements, Bollinger Bands clearly displays current trends. The upper Bollinger Band is currently at $12,263.65, and the lower Bollinger Band is $11,130.35.

The center band is priced at $11,697. Clearly, the current price of Bitcoin sits in the top half of the bands, indicating that momentum is still on the bullish side. Should the price of Bitcoin drop beneath $11,697, or the moving center line, traders and investors may start going short on the cryptocurrency.

As a rule, cryptocurrency is known to be the most volatile instrument on the market, more so than Forex trading. Unprecedented increases or decreases in pricing or possible at the proverbial drop of a hat, making this a tough market to call. The current trends tend to indicate an ascending channel on BTC daily charts, particularly over the course of several weeks, or months.

Bitcoin’s recent breakout above $12,000 + and subsequent retracement indicate a mix of profit-taking and skepticism about the fundamentals of this financial instrument’s trajectory. Nonetheless, futures trading remains largely bullish on the back of current trends.

Source: Ycharts Bitcoin YTD Pricing
Source: Ycharts Bitcoin YTD Pricing

Leading investors such as Michael Novogratz of Galaxy Digital, anticipate Bitcoin prices in the region of $20,000, largely due to all the money being pumped into the global economy right now. Excess liquidity and high levels of retail investor interest tend to favor appreciating Bitcoin prices, as we are currently experiencing. The price of Bitcoin on January 1, 2020 was $6,965.72, and now the price is trading at approximately $11,800, indicating a 69% appreciation in 8 months.

Source: Ycharts Bitcoin Transactions Per Day
Source: Ycharts Bitcoin Transactions Per Day

It’s not just retail investors who are shifting their focus to Bitcoin during these uncertain times, it’s institutional investors too. The number of Bitcoin transactions per day has increased sharply since global stock markets tanked in March, and levels are significantly higher heading into September.

Clearly, the broader trends are bullish for BTC and traders going long will likely enjoy better performance from current support levels. Technical indicators reflect a first support Pivot Point at $11,523.33 and a second Pivot Point at $11,330.00. Currently the first resistance point Pivot Point is at $12,003.93, and the second resistance Pivot Point is at $12,291.22. At these levels, BTC futures are certainly bullish.

This article was originally posted on FX Empire