Bitcoin futures volume on CME spiraled up to 6739 contracts on July 5th, the second highest since CME introduced the product on December 17, 2017. This does signify developing investment in a crypto investment making a lot of analysts believe that funds have started flowing from the wall street to cryptocurrencies.
Detailing the spike
CME Bitcoin futures are based on the CME CF Bitcoin Reference Rate (BRR), which aggregates bitcoin trading activity across major bitcoin spot exchanges between 3:00 p.m. and 4:00 p.m. London time and each contract are worth 5 bitcoin, as defined by the CME CF Bitcoin Reference Rate. So if one calculates at prices of July 5 the calculation turns out to be a total of $222 million (6739 * 5 * $6600).
This is huge money in terms of any investments. This is the reason a lot of analysts believe this could be institutional money that is flowing into cryptos.
The same analysis was put forward by Mati Greenspan Senior Market Analyst @eToro.
Bitcoin futures on the CME spiked to 6739 contracts on Thursday. That's the highest I've ever seen it.
The contracts are worth 5 BTC each, so at today's prices, that's a total of $222 million (6739 * 5 * $6600).
— Mati Greenspan (@MatiGreenspan) July 10, 2018
There was a lot of debate around his view as a few felt that it’s not necessary that its institutional money that’s come into cryptos but it could be a billionaire whole who could have a pump/dump in order to get this kind of movement on CME. Although unnatural for a billionaire to do it, but the possibility couldn’t be ruled out.
Is this a signal for big investment moving to the crypto street?
What actually caused these movements, was unknown but this still is a sign that there is interest in cryptos building up and with the way things are developing every day, Greenspan couldn’t be completely wrong. Over few months cryptos have caught the eye a lot of traditional wall street hedge funds. The venture capital arm of the Rockefeller Foundation, Venrock, had signed a partnership with Coinfund, a Brooklyn-based cryptocurrency investment fund.
There a lot of Wall Street bankers have moved to crypto firms. SBI holdings in Japan is also considering investments in Cryptocurrencies. The CME group itself had reported that demand has been rising from institutional investors in Asia and that demand was up by 50% over the first four months of 2018.
The same is suggested by the product development underway by leading Wall Street Fund houses to meet the demand of its clientele. A lot is still awaited as there is still no clarity on regulations but if experts are to be believed its just a matter of time.
With so much demand and “brain drain” happening from Wall Street to Cryptos its inevitable for institutional investors to keep a blind eye on cryptocurrencies and the kind of a number of contracts reported on July 5, 2018, will be a regular sight.
Will Institutional money actually move to cryptos or will regulation stop this flow? Do let us know your views on the same?
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.