Bitcoin: As Institutional Occupancy Increases, This Metric Increases

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Bitcoin Open Interest in the dedicated institutional derivatives market has moved closer to its ATH. Volatility remained high, but the funding rate was negative at press time.

Bitcoins [BTC] The rally for most of January may be due to many factors, but one element that could not be ignored was the growing presence of institutional investors. While not to minimize the impact on retail, growing institutional participation has been a massive contributor to activity in the futures market. This is the result of Arcane Research’s Ahead of the curve market update.

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The return of big wigs

The Chicago Mercantile Exchange (CME) Open Interest (OI) in the futures derivatives market is an important element that has proven its institutional authority. The CME is a global derivatives market operated by the world’s largest traders and used primarily by institutions for trading options and futures.

According to Arcane, the CME was only 21% away from breaking its all-time high (ATH) since turning negative during the FTX collapse in November 2022.

Source: Arcane Research

The last time the OI was this high was in October and December 2021 when the market was still full of greens. Also, BTC futures ETFs were launched around this time. Therefore, this also helped the hike.

As the OI in this regard grew, Arcane pointed out:

While ETF feeds remain stale, open interest in CMEs is growing. The growth is driven by increased direct activity, with the contribution of non-ETFs to CME IO rising from 40% to 53% so far this year.

The surge also impacted the cumulative exchange of open interest on BTC futures. However, there were some slowdowns. For example, BTC stored in offshore exchanges fell by 18.6%. This is perhaps unsurprising, as the surge in futures and institutional options meant that significant volume would have left the reserves.

Funding rate remains neutral but BTC volatility is at the top

Despite the OI highs, the digital asset research firm noted that it was different from the funding rate. Although the measures experienced peaks and troughs, the overall sentiment remained generally neutral.

Read bitcoins [BTC] Price prediction for 2023-2024

According to the January 24 Arcane report, the average funding rate was 0.05% on the Binance and Bybit exchanges. However, Binances’ funding rate at press time was down to -0.01% according to data from Santiment. Indications from the on-chain analytics provider showed that it only fell from the Arcane figure on January 25.

Source: Santiment

Meanwhile, implied volatility has risen since the start of the BTC rally. This metric measures the movement of futures prices against realized volatility, which deals with historical price movements.

When implied volatility rose above 60, the accompanying realized volatility also rose. This implied that there were reasons for notable price changes resulting in gains or losses. But with the biases resistant to negativity, volatility provided uptrends.

Source: Arcane Research

Still, investors might need to dampen their optimism about BTC’s bullish traits. This was because of the controversy that rocked the Gemini exchange and Genesis’ bankruptcy filing.

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