The CME Group has reported that Bitcoin futures hit a record trading volume on Thursday, the 4th of April.
Futures markets heat up with long and short positions
While cryptocurrencies keep trending in the bullish direction, the futures markets heat up with both long, as well as short positions. In comparison to the typical crypto exchanges, which permit investors to trade crypto with other investors based on agreed prices the futures market permits for widespread price speculation.
The investors that want to bet against the current bull trend for Bitcoin, or who may also think the currency already exceeded its market value, may open short positions and cash in if the currency falls. Likewise, bullish investors may engage in long contracts, believing that the current market price pale compared to future valuation.
According to one tweet published by the CME Group, Bitcoin futures hit an all-time high by a wide margin with traders initiating 22.500 contracts worth more than 112,000 BTC, which happened on the 4th of April.
The presence of futures market curtailing the Bitcoin’s price growth
CME Group and also the Bitcoin futures trading that they provide has a historical legacy with the price of Bitcoin. The group opened Bitcoin futures trading to the public on the 17th of December, 2017, during the last epic bull-run for BTC which took the crypto to $20,000. But the price has soon curtailed, and within a week of CME Group joining the scene, BTC entered a steady free-fall in valuation.
Some investors even pointed to the presence of the futures market as curtailing the price growth of Bitcoin, especially given the susceptibility of the crypto market to manipulation relative to one of the traditional stocks. Futures also provide a way for the investors to bet against the price of the currency, thereby capitalizing on BTC shorts; however, it may also provide a source of manipulation if institutional clients begin influencing the market.
Earlier in that week, Chicago Futures Trading Commission or CFTC released its report on BTC trading positions, finding that the ‘smart money’ actually had overwhelming shifted against a continued crypto rally. According to the same report, small-time investors were actually changing their future contracts to decrease shorts and increase longs.
Compared to that, some larger institutional investors were steering in the opposite direction, increasing their short positions while also pulling back on bullish future contracts for Bitcoin.
The 200-day moving of BTC considered a bullish sign
No one can seem to conclude the current Bitcoin market’s nature, with analysts equally claiming the coin is actually overbought and set to take off on another price rally.
Fundstrat, which is a famous crypto analytics firm, pointed to Bitcoin trading above its 200-day moving average as an extremely bullish sign for the currency even with the massive gains that BTC accumulated so far.
But, some other analysts are starting to point to $6,000 as a substantial source of resistance for BTC. BTC was actually trading around $6,000 before the crypto market collapsed in the middle of November of last year.
Given the glut of investors that lost money in the sudden market movement, there is probably going to be significant resistance at traders attempt to recoup from their positions.