Bitcoin Price Surges Above $35,000 as Interest in Cryptocurrency Grows
The price of bitcoin, the world’s largest cryptocurrency by market cap, has experienced a significant increase in value in recent weeks. After remaining stagnant around $26,000 for much of the summer, bitcoin began climbing during the week of October 23. It recently reached its highest level since May 2022, surpassing $35,000.
There are several theories as to why bitcoin is appreciating. One possibility is the potential approval of exchange-traded funds (ETFs) that hold actual bitcoin by U.S. regulators. These spot bitcoin ETFs would provide investors with additional avenues to access bitcoin exposure and could attract those who have been hesitant to enter the market.
The approval of the futures-based ProShares Bitcoin Strategy ETF (BITO) in October 2021 was a significant milestone in the cryptocurrency space. It garnered over $1 billion in assets within just two days and continues to attract interest from investors.
Another theory for bitcoin’s price surge is its upcoming “halving.” This programmed adjustment to the blockchain reduces the reward miners receive for processing transactions and creating new bitcoin. The reward is cut in half from 6.25 bitcoin per block to 3.125 bitcoin per block. This event occurs approximately every four years until the maximum supply of 21 million bitcoin is reached. The next halving, Bitcoin’s fourth, is expected to take place by mid-April 2024. Historically, bitcoin’s price has experienced significant increases before and after halving events, leading to potential volatility in the market.
The geopolitical and macroeconomic landscape surrounding the upcoming halving differs from previous ones. The availability of regulated and liquid Bitcoin futures and options from CME Group provides firms with trusted instruments to hedge their bitcoin price risk or gain exposure to the cryptocurrency.
Investors who participate in the futures market typically have two objectives: hedging the price of an asset by locking in a future price or speculating on the price direction to seek profits. CME Group offers Bitcoin and Micro Bitcoin futures and options, which can help investors navigate the risks and opportunities in the cryptocurrency market.
Trading cryptocurrency futures on CME Group brings several advantages for investors. Firstly, the contracts are cash-settled in USD, eliminating the need to store and secure actual bitcoin. This reduces operational hurdles and eliminates concerns about hacking or insurance.
Secondly, CME Group’s cryptocurrency futures are regulated by the Commodity Futures Trading Commission (CFTC), providing customer protections. Funds are fully segregated, and each trade is centrally cleared, mitigating counterparty risk.
Lastly, futures make it easier for investors to short bitcoin or ether. Selling futures contracts allows investors to profit from downward price movements or hedge their existing cryptocurrency holdings. This flexibility appeals to both risk-seeking and risk-averse investors.
Micro Bitcoin futures and Micro Ether futures offer investors more precision and control over their exposure. These contracts are smaller in size compared to full-sized contracts, allowing investors to trade with smaller amounts of capital.
Institutional interest in Bitcoin futures has been steadily increasing. Open interest, a measure of client demand, reached an all-time high of 20,380 contracts on October 25, equivalent to 101,900 bitcoin. This represents a notional value of $3.5 billion. The number of large open interest holders (LOIH) of CME Group’s Bitcoin futures also reached a record high of 122 on October 24.
Retail investors have also contributed to the growing interest in bitcoin futures. The ProShares Bitcoin Strategy ETF (BITO), which invests in CME Group Bitcoin futures, experienced a significant increase in trading volume. In the past week, the rolling five-day volume in BITO rose by 420% to $340 million.
It is important to note that CME Group futures are not suitable for all investors and carry the risk of loss. As the popularity of bitcoin and cryptocurrencies continues to rise, investors should carefully consider their risk tolerance and investment strategies.
Overall, the recent surge in bitcoin’s price and the growing interest in cryptocurrency futures highlight the evolving landscape of digital assets. With the potential approval of spot bitcoin ETFs and the upcoming halving, the future of bitcoin remains uncertain but filled with opportunities for investors.
Note: This article has been edited for accuracy and clarity.