Bitcoin (BTC) futures on the CME will face selling pressure if spot Bitcoin ETF is approved: K33

Open interest in Bitcoin (BTC) futures on the leading U.S. marketplace hit a record high on Tuesday as institutional players continue to invest in the asset in anticipation of a spot Bitcoin ETF approval, but the trend may soon end as green Light from the SEC will trigger selling pressure. K33 Research said in a note.

Open interest (OI) – active trading positions – for BTC futures contracts on the Chicago Mercantile Exchange (CME), the largest BTC futures trading venue preferred by sophisticated market participants, rose to $6.2 billion during the day dollars or 132,900 BTC. Both new all-time highs, as data from CoinGlass shows.

The record was broken when the CME Bitcoin OI nearly doubled from 72,000 BTC in mid-October, with market participants increasingly betting on regulators to approve the first spot-based Bitcoin ETFs that can hold Bitcoin directly. Steady inflows into futures-based Bitcoin ETFs such as ProShares' BITO, which holds BTC futures traded on the CME, also contributed to the increase.

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In a sign of bullish sentiment, CME front-month futures contracts traded at a hefty 18.7% annualized premium to spot prices, according to TradingView data.

However, K33 Research predicted in a market report on Tuesday that this regime will not last and both open interest and premium will decline if a spot-based Bitcoin ETF is approved in the US

The report noted that about 43% of CME Bitcoin futures contracts belonged to futures-based ETFs. Since investors are likely to shift their funds to cheaper spot ETFs, futures funds will have to close their positions, reducing open interest and the premium.

The other 57% of contracts are held by active market participants, the report said, whose exposure has increased by 128% – from 33,000 BTC to around 75,000 BTC – in the last three months. Keeping these positions open is very expensive at the current premium, K33 noted, predicting that some investors will look to make profits after the Bitcoin ETF is approved.

“All else being equal, this structural rotation will lead to selling pressure,” wrote K33 analysts Anders Helseth and Vetle Lunde. “CME’s all-time high could be coming to an end quickly.”

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