Retail investors are more bullish about bitcoin’s future as compared to institutional investors, according to new data released from the Commodities and Futures Trading Commission (CFTC). The CFTC’s report looks at trading activity from the Chicago Board Options Exchange (CBOE), which launched bitcoin futures contracts on December 10, 2017.
The Wall Street Journal, which analyzed the data, reports that bullish bets are 3.6 times more likely as compared to bearish calls among investors (or, retail investors) who held fewer than 25 CBOE bitcoin futures contracts. In contrast, institutional investors are 2.6 times more likely to place a short bet on bitcoin as compared to short calls. Bitcoin’s downward trajectory in the last week has provided further ammunition to money manager skeptics to double down on short bets. The CFTC’s Commitment Of Traders report states that institutional money placed 40% more short bets than long bets last week.
But the preponderance of shorts among institutional investors does not necessarily mean bad news for its prospects. For starters, it might represent a hedging strategy against a decline in prices for a firm that has a significant stake in bitcoin.
The Journal also states that shorting could be part of “sophisticated trading strategies” to profit off altcoins, which have surged in price even as bitcoin has crashed in value. But the chances of that occurrence in bitcoin futures are few. This is because the volumes of bitcoin futures trading are too low to make a difference to the cryptocurrency’s price.
For example, the total volume of trading in the bitcoin futures market was approximately $150 million. Bitcoin touched a high of $297.1 billion in market capitalization that day. Retail investors comprise a majority of the unregulated spot exchange markets. The Journal’s report quotes Steven Sanders, an executive vice president at Interactive Brokers Group Inc., as saying that there is “more optimism” in the retail segment as compared to the institutional category. (See also: Four Problems With Bitcoin Futures.)
When they were launched, bitcoin futures contracts were expected to bring price stability to spot exchanges for the cryptocurrency. But low trading volumes coupled with high margin requirements and hesitation from institutional investors has proved to be a bottleneck for more investment. That said, the price difference between futures markets for bitcoin and its spot exchanges has shrunk in recent times. (See also: Price Difference Between Futures And Spot Markets Is An Arbitrage Opportunity.)
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