CME Bitcoin futures surpass Binance for the first time, why is it a milestone moment for the cryptocurrency market?

CME Bitcoin futures surpass Binance for the first time, marking a significant milestone in the cryptocurrency market

Source: Blofin Academy

Compiled by: Jordan, LianGuaiNews

On the evening of November 9, Bitcoin rebounded strongly, breaking through the $35,000 resistance level like a bulldozer and briefly reaching a high of $38,000. The total market capitalization of cryptocurrencies also surpassed $1.4 trillion.

In comparison, the news that the number of open positions in Bitcoin futures on the Chicago Mercantile Exchange (CME) reached 108,900 BTC (about $4.02 billion) and surpassed Binance seemed to have not attracted much attention. However, for the cryptocurrency industry, this is definitely a significant milestone moment.

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(Image credit: Coinglass)

In the early stages of cryptocurrency development, the connection between Bitcoin and the global macroeconomy was not very tight. But over time, as the largest decentralized network in the world, Bitcoin applications have become increasingly widespread. Its price trends have also gradually converged with global economic trends. The chart below shows the year-on-year growth rate of Bitcoin and global M2 money supply from 2014 to 2023:

In fact, Bitcoin combines many advantages of gold and foreign exchange, such as:

1. BTC as a global liquidity network, the transfer of liquidity is relatively easier;

2. BTC price trends can timely reflect changes in global liquidity levels;

3. BTC can serve as a short-term hedge, playing the role of temporary “liquidity channel” and “safe haven” for risk capital;

4. BTC trading is more decentralized than foreign exchange trading and is less susceptible to regulation and central bank policies.

On the other hand, starting from the fourth quarter of 2022, the correlation of Bitcoin with gold, Nasdaq, and the U.S. dollar has gradually weakened (as shown in the chart below). To some extent, this means that Bitcoin is more conducive to diversifying the overall risk of investment portfolios and reducing volatility.

For the reasons mentioned above, institutional investment exposure to Bitcoin has been increasing steadily since 2021. According to statistical data from financial index analysis firm VettaFi, as of November 2023, the ProShares Bitcoin Strategy ETF (BITO) has become the most actively traded cryptocurrency ETF, with significantly higher average trading volume than gold ETFs.

In addition, based on two indicators, futures open interest (OI) and trading volume, institutional traders’ demand for BTC exposure is also increasing. Since January 2018, the open interest in Bitcoin futures on the Chicago Mercantile Exchange (CME) has increased by over 100,000 standard contracts (Note: each standard contract represents 1 BTC).

Furthermore, the average daily trading volume of CME’s cryptocurrency futures is now comparable to that of many mainstream futures products, as shown in the table below:

Overtaking Binance indicates that CME now has the largest share of the BTC Delta 1 market, and it also means that the connection between the cryptocurrency market and other markets has become closer. Once spot ETFs are listed as scheduled, it will undoubtedly attract more traditional institutions to expand their cryptocurrency investment exposure, and CME’s position in the global cryptocurrency market will further improve.

Of course, traditional institutions may prefer to view the cryptocurrency market from a global macro perspective, and their entrance into the market will also bring global macro narratives into the cryptocurrency market, which is very different from the “natives” of the cryptocurrency world. Therefore, for investors, if they continue to analyze the cryptocurrency market using old frameworks, it may no longer be effective, and it is necessary to introduce new analytical frameworks that are cross-asset and cross-market.

In summary, the “Wild West era” of cryptocurrencies is coming to an end, and the “cryptocurrency macro era” that is becoming increasingly intertwined with the global economy is just beginning.

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