Bitcoin Open Interest Surges to May Level Along with a Rise in Net Dollar Longs

The optimistic begin to October has continued this week, with the value of Bitcoin rising from $48,250 to $56,645 on Friday. As of this writing, BTC/USD is trading about $55,000. With this recent price increase, Bitcoin has turned out to be a trillion-dollar asset class once again. As per Chainalysis, individuals possessing a minimum of 1k BTC have grown their possession by 172,000 BTC since Bitcoin’s bottom in the final week of July. In the meantime, institutional traders have purchased another 68,000 BTC.

Ether, similar to the top cryptocurrency, began the week at $3,400, rose to $3,675, and is currently trading at $ 3565. The whole cryptocurrency market cap increased by over 9.5% to about $2.4 trillion. The largest gainer in the cryptocurrency market this week has been SHIB, which is up by 232%.

FTM (44%), ONE (37%), OHM (25%), BTT (21%), XRP (18%), DCR (16%), AXS (16%), and EOS are also significant winners (15%). With it being traditionally a bullish quarter, coupled with the possibility of forthcoming licenses for BTC ETFs in the US, the stability of the Evergrande issue, and conventional heavyweights like Soros Fund Management becoming crypto-positive, Q4 seems poised for substantial price-performance.

Demand from Institutions notwithstanding the 14% increase in Bitcoin price, the financing rate remains low, with the highest presently on OKEx at 0.0453 percent, according to Bybt. Open Interest has also risen to $19.15 billion, a level previous seen at the beginning of May. The OI (open interest) has risen by approximately $6 billion in little over 10 days.

According to Skew, CME is especially active, with OI on Bitcoin contracts resting at $3.12 billion, just like FTX and only below Binance at $4.35 billion. On September 29, open interest on the regulated marketplace CME was $1.47 billion. For Ether contracts, OI on CME is presently at $830 million, with an ATH of $860.75 million set for early September — yet it ranks sixth.

According to QCP Capital, the substantial rise in OI indicates that “institutional demand has been the underlying engine of this move upward.” Furthermore, the “unusually high premium on CME suggests a massive amount of outright purchasing.”

The premium on CME futures has been the largest among the main exchanges, despite the fact that it is usually compressed owing to cash-and-carry spread transactions that institutional players prefer to enter — purchase spot vs. sell CME future.

“Expect volatility and the continuation of the spot bid.
Derivatives are now attempting to join in on this trend as if the market is offering a bus stop for them to board.
OI is increasing due to a significant rise in perp basis / premium photo.
twitter.com/lFdVEPoiGM
— Ryan Cantering Clark (@CanteringClark) 10/7/2021.”

As per a filing this week, Senator Cynthia Lummis, R-Wyo., purchased between $50,000 and $100,000 in BTC in mid-August. This, however, is not her first purchase of Bitcoin; she originally purchased it in 2013. She also admitted to purchasing Bitcoin between $100k-$250k in April of this year. Dollar longs are at a two-year high.

While crypto is euphoric, the S&P 500 is only up 2.14 percent this month and 17.14 percent year to far, relative to Bitcoin’s 90% rise in 2021. Gold is also up 1.60 percent this month but down 7.27 percent year to date. When it comes to the US dollar index, it is up 0.56 percent this month and 2.74 percent this year.

Nevertheless, net longs in the US dollar have risen to their highest level in over two years. The value of the net long dollar position increased to $22.89 billion in the week ending Oct. 5, up from $16.37 billion the previous week. Traders have been net-long on the US dollar for 12 weeks after being short for 16 months, owing to the Federal Reserve’s suggestion that it may begin tapering its asset purchases in November of this year.

However, before the weekend, the dollar fell as statistics revealed that non-farm payrolls in the United States rose by just 194,000 jobs last month, compared to the anticipated 500,000 new positions.

“U.S. inflation statistics due out next Wednesday may add to evidence that inflationary pressures are proving less ‘transitory’ than previously thought,” said Jonathan Petersen, markets economist at Capital Economics. “We continue to believe that this will drive US rates and the currency higher in the coming months.”

Meanwhile, bitcoin net shorts rose to 1,518 contracts, the most since late July, up from 883 the previous week. El Salvador, which continues to experience increasing bitcoin usage, is now proposing to spend part of the $4 million profits from its Bitcoin activities towards the construction of a veterinary hospital, according to President Nayib Bukele this week.

According to Bukele, the Bitcoin Trust, which was approved by Congress in August to enable BTC and USD transactions, currently has a “surplus” of $4 million above its initial balance of $150 million. “So we decided to put some of that money towards this: a veterinary facility for our animal companions,” Bukele said on Twitter (NYSE: TWTR).

He went on to say that the veterinary hospital will provide basic and emergency treatment, as well as rehabilitation. El Salvador became the world’s first country to accept Bitcoin as legal currency earlier this week. According to BitMEX CEO Alex Hoeptner, Salvador is just the first of at least five nations that will adopt bitcoin as legal money by the end of next year, with all of them being poor countries.

“In the face of a fundamentally unfair financial system, those who stand to lose the most by maintaining the current quo are acting in their own self-interest by exploring other alternatives such as Bitcoin.”