September was a slow month for Bitcoin. But lower prices have paved the way for a resurgence in October, with the largest cryptocurrency seeing its value rise more than 30%.
Bitcoin is revived
Institutional investors, companies that pool money from others to transact, are taking notice, according to a new report from crypto-focused Arcane Research. And their re-entry into the market could actually push the asset price upwards.
After Bitcoin pushed through two major price resistances in early October, the amount of money in front-month Bitcoin options contracts reached. This means they will expire at the earliest this month. “Levels have not been seen since April 15. This suggests that bullish sentiment is emerging among institutional investors,” the report said. April 15 was one day after Bitcoin hit an all-time high of $64,804; the current price is back at $57,000 after dropping to $40,000 last month.
In addition, open interest is beginning to migrate to the Chicago Mercantile Exchange (CME), an early adopter of Bitcoin futures. According to the report, “CME’s share of global open interest in bitcoin futures is reaching 17%, the highest level since February 2021.” Open interest is a measure of the number of derivative contracts. It allows people to bet on the future price of an asset.
Strictly for institutional investors
Arcane Head of Research Bendik Norheim Schei told Decrypt that this suggests bullishness among institutional traders “mainly because CME is strictly for institutional investors.
One theory is that institutional investors are piling up in anticipation of the SEC’s approval of a Bitcoin ETF. ETFs, or exchange-traded funds, are financial products that track a security or basket of securities. They can be traded like stocks and fit nicely into retirement plans. A Bitcoin ETF would easily expose ordinary investors to Bitcoin’s gains (or losses). This would increase market demand for the asset.
While the SEC has rejected multiple Bitcoin ETF proposals over the years, there are a dozen applications on the agency’s desk. And the industry is abuzz with speculation that the SEC will approve one next week. However, it is possible that it will not be a Bitcoin ETF, but a Bitcoin futures ETF; the SEC’s chairman has been positive about the latter.
Futures, like options, are a form of derivative contract. And Schei thinks the SEC’s deliberations will affect how futures traders think about the future. He said the following:
I think the Bitcoin ETF discussion we’ve seen lately has attracted institutions. They may be trying to get ahead of a possible decision next week, but interest among institutional investors certainly increased in October.