CME Futures Volume Hits Record High, How Will This Affect Bitcoin's Spot Price?

Bitcoin’s current market is experiencing a significant price reshaping , the effects of which are being felt across the industry, with traders and investors closely watching developments in this market while volumes are high.

Institutional player CME is currently setting impressive highs on the trading charts, and the derivatives market is not an isolated place either.

As the attached chart shows, CME futures volume hit a new all-time high in the last 24 hours, at nearly $2.7 billion . At the time of writing, the average daily volume is well above $700 million.

Additionally, open interest also hit a new high, with $1.8 billion OI (open interest indicator) recorded on January 4, 2020, and the number has continued to grow since the December contract expired.

While the derivatives market does not directly impact Bitcoin’s spot price, at press time, things appear to be somewhat different.

Although spot prices are not directly affected by the futures market, they do have some degree of influence in the short term, through arbitrage trading in the spot market that can quickly be used to hedge large purchases in the futures market, and vice versa.

In short, whenever CME futures volume or OI is high like it is at press time, traders can look for arbitrage , hoping to buy or sell spot Bitcoin at a higher or lower price after their purchase. This is a time-consuming process where price differences between multiple exchanges come into play.

While this works in the short term, CME Bitcoin futures may also improve the stability of spot prices in the long run. The increasing flow of funds in CME futures indicates that the interest of qualified traders or institutional traders is also increasing. As CME attracts capital inflows from mainstream traders, this leads to low risk in BTC spot prices , which may be the result of increased trading volume and OI.

It is noteworthy that during the bull run of 2017, no institutional product showed appreciation against spot prices. So in the absence of strong fundamentals, the rally was washed away like a sand castle.

Currently, CME derivatives are more obvious and popular, and in the long run, their impact on BTC spot prices will also be more obvious.

The original text comes from ambcrypto and was translated by Blockchain Knight. The English copyright belongs to the original author. Please contact the translator for Chinese reprint.