Doomsday for Bitcoin (BTC) Futures Demand as Investors Swap to ETFs

The market study states that since the spot Bitcoin ETFs were introduced earlier this year in January 2024, the demand for Bitcoin futures has decreased dramatically. Here’s a first look at how ETFs may impact other bitcoin investment products available on the market.

Open Interest in CME Group’s Bitcoin Futures Drops

Three weeks ago, 10 spot Bitcoin ETFs were introduced. As a result, open interest, or the number of outstanding contracts, for CME Group Bitcoin futures, dropped by 24% to 20,679 by January 30. Open interest had already hit a record high, according to statistics collated by Bloomberg, mostly due to the ETF debuts and Bitcoin’s amazing 157% increase last year.

Because they offered a regulated venue for exposure to Bitcoin, CME futures have become more and more popular. However, the open interest in CME Bitcoin futures has declined due to the availability of spot ETFs that fulfill a comparable function. Although the $21 billion Grayscale Bitcoin Trust (GBTC) was the subject of active arbitrage tactics involving the futures contracts, cryptocurrency asset management DACM believes that this specific transaction has run its course.

Senior analyst at K33 Research Vetle Lunde observes that although investors may be moving to US ETFs and the recent cooling off of Bitcoin, which could lead to less activity in CME Bitcoin futures, these futures contracts are still very important and liquid parts of the cryptocurrency market. Lunde highlights that authorized participants in charge of overseeing the issuance and redemption of ETF units may be able to use them as hedging instruments.

The two most prominent exchanges for Bitcoin futures are CME and Binance. According to recent statistics from Coinglass, a major factor influencing the general fall in Bitcoin futures activity is the decline in CME open interest.

Demand for Bitcoin ETFs Is High

The market landscape has undergone a substantial transformation since spot Bitcoin ETFs were introduced on January 11. Notable offerings from financial giants such as Fidelity Investments and BlackRock Inc. Furthermore, the well-known Grayscale fund, which has the largest portfolio of Bitcoin, moved from being a closed-end fund to an exchange-traded fund (ETF) style.

There was a change in the Grayscale vehicle’s shares, which now have a discount to the portfolio’s underlying Bitcoin holdings. Compared to early 2021, when the product was organized as a closed-end fund, this phenomenon represents a change. ETF units usually follow net asset value (NAV) very closely, which has led speculators to believe that the trust’s discount will eventually vanish.

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