USD 5 billion in Bitcoin futures contracts, what does that mean?

Bitcoin futures contracts are unprecedentedly popular, according to data from Skew Analytics. Below you can see the open interest, i.e. the dollar value of all current bitcoin futures contracts. Yesterday, this value reached a record high of 5.7 billion dollars. But what does this mean for bitcoin and the exchange rate? 

About bitcoin futures

To answer that question, it is first useful to know what bitcoin futures are. Using bitcoin futures you can speculate on the price of bitcoin. The idea is that you buy or sell Bitcoin Aussie System review at a predetermined price. The price depends on whether you think the price is going to rise or fall. Whether the price rises or falls, you can always make a profit that way.

The open interest indicates how many dollars are currently speculating on the price of bitcoin using futures. What you don’t know is how many investors have entered into a long position (speculating on a rise) or a short position (speculating on a fall).

Open interest and rising price is good

According to cryptocurrency research agency Messari, a rising open interest in combination with a rising bitcoin price is good news. In a survey published today, the team says the following about it:

„The high value of the open interest combined with bitcoin’s rising price can be good for bitcoin. This can mean that new money is flowing into the market, investors entering new positions. It indicates a bullish sentiment when open interest is driven by long positions“.

Keep an eye on the elections

But the open interest doesn’t tell you everything about the course of bitcoin. The same study by Messari describes that the outcome of the elections can also influence the price. Messari’s reasoning is as follows: if Trump loses, he will not benefit from creating a new stimulus law before he leaves the White House in mid-January. That would be detrimental to bitcoin.

But the outlook on bitcoin remains positive: „While bitcoin volatility may increase in the short term, bitcoin is increasingly proving to be a macro asset taken seriously by organisations and the investment community.