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Analysis
12 Apr 2023

CME behind BTC's recent strength?

Growing OI and volumes before and during the initial push higher suggests so.
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Preview
Source: Tradingview

In Short

Leverage is booming in BTC derivatives, surging by 10% since the Sunday close. Under the hood, CME traders seemingly ignited the Monday strength leading to a substantial short squeeze on Binance.

Takeaways

  • Global BTC OI up 10% from the Sunday close
  • CME OI up 19% in the same period
  • Active market participant share growing from 40% to 47%
  • BITO BUM reaching an ATH after surpassing 35,000 BTC
Increased activity on CME before and during yesterday’s initial spike towards $29k suggests that CME traders were behind the initial push higher. Binance traders unwillingly followed suit as shorts were squeezed amidst the $30k breakout. Monday’s rally saw enhanced activity on CME, particularly during the build-up and first leg higher towards $29,000. The growing activity was accompanied by CME seeing the largest relative growth in open interest of the BTC derivatives venues at 16%. CME saw lower volumes amidst the breakout above $30k, suggesting a relatively orderly breakout on CME. Binance experienced similarly elevated volumes, albeit with a lag to the initial breakout. However, compared to CME, Binance saw a massive spike in volume amidst the 30k breakout, likely caused by a powerful short squeeze, illustrated in Figure 16. Amidst the initial rally beyond $29k, Binance’s OI surged. The two legs higher over the evening saw open interest retrace substantially, a considerable deleveraging after an abnormally rapid growth in OI. The enhanced volume during the substantial OI decline suggests a significant short squeeze occurred.
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Source: Tradingview
CME and Binance seeing the largest growth in open interest
CME has experienced an open interest growth of 19% since the Monday open and saw the largest increase in open interest among all derivatives venues. Binance has seen a 9% growth in part subdued by a late Monday short squeeze.
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Source: Laevitas, CME Group
This suggests that CME activity after the Easter holiday was the catalyst behind the move, with leveraged underwater positions offshore enhancing the directional momentum.
A push ignited by active market participants
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Source: CME Group, ProShares, Valkyrie, VanEck, Bitwise
This week’s market activity on CME’s BTC futures has been very interesting. During the Easter holiday, we saw a substantial fall in the active market participant share, as speculators were conservative with exposure amidst the banking holiday period. On Monday, however, CME experienced burgeoning activity primarily driven by active market participants, leading the active market participant share of CME’s OI to grow from 40% to 47% on Monday.
But ETP traders also contribute to the elevated OI
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Source: ProShares
On Tuesday, BITO's BTC equivalent exposure surpassed 35,000 BTC for the first time in history, reaching a new all-time high after seeing a three day inflow of 2,890 BTC (+9%).
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