04 Oct 2022

All-time high perp OI: 450,000

The last three funding rate intervals on Binance have seen funding rates at neutral levels, while open interest has grown further, reaching yet another notional all-time high of 450,000 BTC.
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Futures premiums see slight growth on Binance while CME still tends to trade below the spot market.CME’s BTC futures have traded at a discount to spot throughout the second half of September, as active institutional traders stay cautious.
Source: Skew, Laevitas, Tradingview, CME *Closed Saturday - Sunday
Binance has seen a more erratic pattern in the futures market, and the futures basis is trending up. Binance futures trades at a 2% premium for the first time since early September, suggesting that sentiment has seen a slight improvement lately. Nevertheless, premiums remain at extremely low levels, and there are few signals from the futures market in isolation.
Perps also in a slow environment - but be aware of the OI surge
Funding rates remain neutral to below neutral for the tenth consecutive month.
funding rate
Source: Skew, Bybit, Binance
However, the last three funding rate intervals on Binance have seen funding rates at neutral levels, while open interest has grown further, as we elaborate below.This could indicate a growing willingness to add long exposure in BTC as BTC once again battles with the $20k resistance. This growth originates from a prolonged environment of low volatility, with BTC oscillating in a very narrow trading range. The currently spiking open interest could generate a volatile environment as positions get unwound, and investors should prepare for possible squeezes.
BTC denominated open interest at all-time high
Source: Laevitas
A new concerning record has been reached in BTC perps as the open interest has spiked to another all-time high of 450,000 BTC. The BTC-denominated open interest has now been on a vertical venture since the Luna collapse in May. While the open interest in BTC perps is always evenly distributed between longs and shorts, the persistent uptrend suggests that shorts have been the leading force in this growth, reaping the benefits of a funding rate structure in favor of shorts. Nonetheless, the latest push topped with neutral funding rates on Binance suggests that short-term optimism by bulls has contributed to the recent spike. Be aware of any breakouts of BTC’s trading range. This clogged-up open interest is likely to exaggerate any directional move as it gets unclogged.
50% of CME’s open interest in BTC is held by ETFs
The bitcoin-denominated open interest currently sits above 70,000 BTC, near all-time highs. However, as illustrated in the chart – ETFs account for more than 50% of the open interest on CME.
Source: Skew, ProShares, VanEck, Valkyrie
Additionally, ETF flows alone contribute to 5-10% of the trading volume in CME’s bitcoin futures. When excluding the ETFs contribution to the open interest from the market, CME’s open interest aligns with levels seen last summer. Interestingly, we note an increase in ETF excluded open interest from Q1 and Q2 2022 levels, suggesting that active institutional traders are more active in BTC futures, despite low futures premiums and reduced yield-based trading strategies. We’ve previously emphasized the importance of CME’s BTC futures in BTC’s price discovery. ETF flows have likely become an important further contributor through their role in CME’s BTC futures, and thus BTC’s directional pattern, which is why we frequently highlight BITO and BITI flows in our reports.
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