$546 Million: CME Bitcoin Futures Hits Record 1-Day Volume; Could Spike BTC Beyond $6,000
Throughout the past seven days, following its initial rally on April 1 from $4,200, the bitcoin price increased from around $4,673 to $5,218, by well over 11 percent.
The rest of the cryptocurrency market including major crypto assets such as Litecoin and Ethereum recorded large gains against the U.S. dollar with the momentum established by bitcoin.
Bitcoin Needs Fuel to Move Out of $5,000 to $6,000 Range, Will CME be That Fuel?
On April 1, various technical factors supported the upside movement of bitcoin and enabled the dominant cryptocurrency to spike by 20 percent as soon as it broke out of an important resistance level at $4,200.
Bitcoin was able to move rapidly from $4,200 to $4,800 within minutes because of three major factors:
- Liquidation of $500 million worth of short contracts on major exchanges
- A single buyer purchasing 20,000 BTC or $100 million
- Lack of resistance above $4,200
Some traders were cautious in the ability of bitcoin to break out of the $5,000 to $6,000 range because it would require strong stimuli to push the asset above that range, similar to how a $100 million buy order and a $500 million shorts liquidation pushed BTC earlier this week.
In the near-term, if the volume of the CME bitcoin futures market can be sustained, there is a high probability that the bitcoin futures market could serve as the catalyst of the next bitcoin movement.
On Tuesday, CME reportedly told Bloomberg that 22,542 bitcoin contracts were traded, worth about $546 million.
Interestingly, most of the volume came during Asia hours, more than half of the daily volume.
“CME Bitcoin futures hit a record 22,542 contracts traded on April 4, equivalent to 112,710 Bitcoin with a notional value of $546 million, according to a release from the derivatives exchange operator. A majority of the trading volume on that day came in Asia hours with 12,634 contracts traded, CME said,” the Bloomberg reportread.
Trades processed during Asia hours does not necessarily translate to buyers in Asia purchasing bitcoin futures contracts but it significantly increases the likelihood of the buyers being based in major cryptocurrency markets in Asia such as Japan and South Korea.
Why Futures Volume is Important Now
Previously, the bitcoin futures market volume was disregarded by many because of the inflated volume of the cryptocurrency exchange market.
According to Bitwise, more than 95 percent of the reported bitcoin volume is inflated or faked, which leaves the futures market responsible for around 35 percent of global bitcoin volume.
17/ And, when you remove fake volume, CME and CBOE futures volume is significant ($91M), especially compared to the real spot volume (35% for Feb 2019).
This is good news because it means CME— a regulated, surveilled market— is of material size, which important for an ETF.pic.twitter.com/pVqMqPSZkt
— Bitwise (@BitwiseInvest)March 22, 2019
From March 4 to March 8, CME andCBOEare said to have recorded a volume of over $91 million.
The $546 million volume of CME on April 4 dwarfs the 4-day volume recorded in early March and it demonstrates a striking rise in demand for BTC in a short time frame.
CME Volume on April 4 Surpassed Total Daily Spot Volume in March
Bitwise also reported that from March 4 to March 8, the total BTC spot volume across all exchanges was $273 million. That is exactly half of the volume recorded by CME on a single day.
4/ Total daily spot volume is about $270M—95% less than reported.pic.twitter.com/kILQcqOlQR
— Bitwise (@BitwiseInvest)March 22, 2019
Whether the volume of the CME bitcoin futures market will be sustained over the medium-term or decline following its initial spike on April 4 remains an uncertainty.
But, it could serve as a catalyst for the next movement of BTC as the $500 million liquidation of short contracts pushed bitcoin further up on April 1.
About The Author
Hong Kong-Based Finance and Cryptocurrency Analyst. Contributing regularly to CCN and Hacked. Providing unique insights into the crypto and fintech space since 2012.