Bitcoin price climbed back above $ 18,000, marking a sharp rebound from its earlier decline during the day to around $ 17,355. Behind the ongoing rally is a noticeable increase in open interest from CME and other major futures exchanges.
The 15-minute price chart of Bitcoin. Source: BTCUSD on TradingView.com
The open interest of the CME Bitcoin futures market rose to over $ 1 billion on November 18. This is due to an increase in the number of billionaires and large financial institutions that publicly support BTC or invest in BTC.
– Skew (@skewdotcom) 18th November 2020
The CME Bitcoin Futures market is primarily aimed at institutions and accredited investors in the United States. Hence, the open interest of over $ 1 billion would likely indicate significant demand for BTC from institutional investors.
The term open interest refers to the total of all long and short contracts in the market. It is useful to measure trading activity or a market or asset like bitcoin.
Bitcoin sees aggressive dip buying, is it institutions?
Bitcoin had strong narrative to see a sharp pullback earlier this week. There were large sell orders at $ 17,500 and high timeframe charts, including the weekly and monthly charts, both of which were well above the short-term moving averages (MAs).
Instead, BTC topped the $ 18,000 level for the first time since 2017. It repeatedly tests the $ 18,500 resistance area supplemented by strong buy orders on major exchanges.
While it is difficult to pinpoint exactly where the demand is coming from, many analysts believe that the main source of demand for BTC in the recent rally is institutions.
Based on the recent trend, Kevin Kelly, head of global macro at Delphi Digital, expects Bitcoin to become an established portfolio asset. He said::
“If our thesis proves correct, BTC could replace a significant portion of the government and government bonds in the average investor’s portfolio in the coming years, resulting in immense capital flows for such an emerging asset.”
So far, in the last few months at least, more institutional and high net worth investors have started to view Bitcoin as a recognized portfolio asset.
The institutional enthusiasm for Bitcoin could have increased market sentiment around BTC. The general open interest of the BTC futures market has also increased noticeably since October.
– Skew (@skewdotcom) 17th November 2020
BTC is still early, big room to grow
Although Bitcoin is approaching $ 18,500 again, which still has a high number of sell orders, BTC is still in the early stages of its growth phase over the long term.
Kelly notes that Bitcoin only accounts for around 0.4% of the world’s M2 money supply. He said:
“In particular, more than $ 10 trillion has been added to the global M2 money supply since late March. $ BTC has nearly tripled over the same period, but its total market value is still only ~ 0.4% of the global M2. “