Bitcoin: futures rise, ETF approval imminent?

Today, Forbes reported that there is a sharp and sudden increase in the amount of money deposited into Bitcoin futures contracts.

Bitcoin futures rise while the SEC is expected to rule on BTC-based ETFs 

The interpretation is that this phenomenon may be linked to the SEC’s impending approval of the first BTC ETF. 

The reasoning of Forbes is this: if at the base of these increases there is a classic case of buy-the-rumour, sell-the-news, the rumour that could have triggered it could be the one relative to the approval of the ETF. 

There are two aspects that point to this hypothesis: 

• The first is that it has been known for some time that the SEC is due to rule on the matter in mid-October 2021. So the news is coming, whether positive or negative. 
• The second aspect is that several analysts claim that the most recent proposals sent to the SEC, which concern ETFs based on Bitcoin futures, would have a good chance of being approved. 

Bitcoin and the “buy-the-rumour” theory

Based on these assumptions, a buy-the-rumour phase may be underway which has led to a sudden increase in the open interest of Bitcoin futures on the CME, as of 12 October it was up 72% from six weeks earlier. 

Previously these contracts had been in the red since mid-February, while now they are in the black compared to the beginning of the year.

The price of BTC has also risen over the past six weeks, from $47,000 to $57,000, in anticipation of the possible news in mid-October of the approval of the first ETF on BTC. 

Among other things, Forbes revealed that only a relatively small number of players are playing a key role on the demand side of these futures contracts, and although the identity of these investors is protected by the CME, it is suspected that they are non-US companies and financial institutions with deep knowledge of the crypto sector.

These are companies that are sophisticated enough to venture into the futures market, and with a lot of capital, as each individual Bitcoin futures contract at the CME is worth five BTC, or more than $280,000. Moreover, hedge funds are also reported to have provided liquidity in recent weeks.

On Sunday, October 17, the identity of these companies will be revealed when the CFTC releases its new COT report. For now, all that is known is that the increase in open interest in BTC futures has been over 2,000 contracts.

Should the news, likely to be released in the next few days, about the SEC’s decision be positive, several analysts argue that it could have further positive effects on Bitcoin’s price. 

What is certain, however, is that big finance is now clearly interested in the evolution of the process of mass adoption of BTC in the financial markets.