CME Bitcoin Futures Analysis: Is institutional interest rising? CFTC report shows that this is not the case

Block BlockBeats news, according to data from the Chicago Mercantile Exchange (CME Group), the company's bitcoin futures products broke another record in both trading volume and open positions.

On June 26th (Friday), the Chicago Mercantile Exchange Group had a nominal transaction volume of more than $1.7 billion (more than 30% higher than the previous record). Although CME Group announced at the end of the data update that its bitcoin futures product "institutional investors' interest continues to increase", the US Commodity Futures Trading Commission (CFTC) weekly COT report data actually tells a more subtle Story: Institutional investors' interest is reduced, nominal value (nominal value refers to the value of a non-monetary asset, in the derivatives market, generally with a nominal amount to indicate the size of the transaction or market size. Including long and short) Increased concentration in Bitcoin futures traders.


The CFTC's weekly COT report (released on Friday and using the closing data for the week) shows that the nominal value of the CFTC-regulated bitcoin futures (the sum of the historical values ​​of CME and CBOE) has soared more than 270 since the first quarter. %, while the price of bitcoin has increased by 150%. Even more impressive is that the nominal value record for public offerings was announced before the spike in bitcoin prices on Wednesday (at the time Bitcoin prices were close to a high of $14,000).


Who is driving such a large sales volume? Looking at the overall situation, it is speculators and smaller non-reporting traders, that is, retail investors (non-commercial traders accounted for >75%, most quarters) pushed the volume of transactions. Those who are classified as "commercial" traders, usually those who use futures for hedging purposes (usually for the input cost of commodities), continue to occupy an unimportant part.


The block rhythm BlockBeats analysis, the most disturbing thing about the lack of “establishing institutional interests”, is that the total number of bitcoin futures traders (in other words, true “institutional” traders) reported by the CFTC is still close to half that of a year ago. Bitcoin futures products, including the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE), have a peak value of just under 100 independent traders. It is expected that CBOE traders will launch CME Group's bitcoin products in May. Turning to the product, but the data so far shows that this is not the case.


In addition, in the second quarter of 2019, the total amount of Bitcoin transactions reported by the CFTC actually contracted. Currently, about four asset management companies/institutions hold active positions on the product each quarter, with hedge funds, self-employed traders and other traders forming the main body of active traders.


Given the small number of independent traders in the market, the net exposure of the four traders is also quite high. In fact, the four largest short-selling institutions last week accounted for 75% of the total unpaid nominal value, a record high. The bulls are slightly better, with about 33% of the outstanding nominal value coming from the top four traders, but in any given week, this figure could be as high as 60%.



By standardizing the ratio of open positions of various trading groups to all open positions, it helps to highlight which trading groups account for the majority of long, short or closed positions. From a bullish perspective, hedge funds account for up to 75% of total open interest rates (January 2019), but they have now given some of their advantages to non-reporting traders (small accounts), which are currently Accounting for 30% of the total open interest rate. In terms of short selling, hedge funds once again accounted for the entire proportion of open interest, but unlike a large number of non-reporting traders, other traders accounted for about 30% of all open interest.



Note: The total % may not be equal to 100%, because the “spread (inter-period trading, refers to the various arbitrage methods of buying and selling related futures contracts to obtain spread profit)” has been excluded from the figure. Or trader's net long and short heads are the same

The ratio of net positions of asset management companies, hedge funds, non-reporting assets and other traders to the total position is relatively stable. Throughout the second quarter, hedge funds have remained relatively net neutral, while asset management companies and retail traders have been heavily bullish (>80%); other traders have been net short (most likely to be traders/sellers) Ability to short the market?)



Looking at the historical changes in long and short exposures in the four major trading categories (excluding traders/sellers), it will be seen that retail traders' net long exposures are increasing, while other traders are open for the entire second quarter. The mouth is constantly expanding.


About the CFTC COT Report

The Commitment of Traders Report is a detailed public report that provides a breakdown of open positions in the futures market on Tuesday, where 20 or more traders hold positions in or Higher than the reporting level. The report is released by the CFTC every Friday and submits the final data at the close of the previous Tuesday.

The COT report includes four main reports, different levels of trader classification and reporting.

1. Dealers/Intermediaries: These participants are the “sellers” of their respective futures markets, who design and sell financial assets to clients. Traders tend to match books to hedging risks.

2. Asset Manager/Institutional Investors: Institutional investors including retirement and mutual funds, insurance companies and large asset management companies.

3. Leveraged funds: usually hedge funds and other fund managers, including cto and CPOs.

4. Other Reports: Traders usually hedge their business risk, whether it is foreign exchange/interest rate/stock risk. Including corporate finance, central bank, small banks, credit cooperatives, etc.