By George Ward
The crypto industry is about to witness an exciting period following the surge in applications by traditional investment managers for spot Bitcoin exchange-traded funds (ETF). Experts opined that these traditional asset managers are filing their applications in anticipation of a substantial bullish move by BTC around the next Bitcoin halving event.
Institutional BTC Interests Despite Market Turmoil
Following last year’s crypto winter and the collapse of prominent industry players like FTX, institutional interest in digital assets has been down. The value of Bitcoin and various other crypto assets has remained stagnant while several exchanges face intense regulatory scrutiny.
However, there was renewed optimism in the industry after notable financial institutions like BlackRock, Valkyrie, and Fidelity applied for regulatory approval to launch their Bitcoin ETF products. As expected, the announcement restored the market’s positive sentiment, pushing Bitcoin’s price above the $30,000 mark and reigniting investor interest in the crypto industry.
Previously, several financial institutions had applied for approval from the United States Securities and Exchange Commission (SEC) for spot Bitcoin ETFs. However, their efforts proved unsuccessful, as the regulatory body rejected their applications while some of the firms voluntarily withdrew their applications.
Meanwhile, the SEC approved the first Bitcoin futures ETF, the ProShares Bitcoin Strategy ETF, in October 2021. The product was officially launched on the New York Stock Exchange on October 19, 2021.
Nevertheless, industry experts believe that the recent filing by the leading asset manager BlackRock has increased the chances of the securities watchdog approving the first Bitcoin ETF in the United States. Following BlackRock’s move, many other investment managers have also sought approvals to offer their Bitcoin ETF products.
In the last 12 months, there has been a spike in the number of traditional institutions exploring the crypto sector. Before 2022, institutional players maintained a cautious approach toward the crypto market, refraining from active involvement.
Even MicroStrategy, known for its routine Bitcoin purchases, paused its BTC accumulation during this period.
Bitcoin Futures Premium Sees 18-month High
Meanwhile, whales and arbitrage operators are exhibiting a solid attraction for Bitcoin futures, contributing to a surge in its popularity in the last 18 months. These fixed-month contracts, often traded at a marginal premium compared to spot markets, imply that sellers demand higher prices to defer settlement.
Thus, BTC futures contracts in active markets are anticipated to be traded at an annualized premium ranging from 5% to 10%. This scenario, commonly referred to as contango, is not exclusive to the crypto markets alone but happens in other financial markets.
Moreover, there has been a notable spike in the demand for leveraged Bitcoin long positions over the past week. The recent uptick in interest coincides with a substantial interest in BTC futures contract premium, which increased from 3.2% to 6.4% on July 3 compared to the previous week.
This surge in futures premium interest marks the highest in the past 18 months and signifies a shift towards a bullish sentiment within the market. As a measure of the prevailing market sentiment, it is crucial to analyze the options markets, specifically the 25% delta skew on the Bitcoin 30-days options chart.
This metric allows users to evaluate whether the recent price inactivity has decreased investor optimism. It also highlights instances where arbitrage operators and market makers adjust their prices to offer protection against upward or downward movements.
When traders anticipate a decline in the price of BTC, the skew metric will surpass the 7% threshold. Comparatively, the skew metric will drop below 7% during periods characterized by an expected spike in BTC price.
Meanwhile, the current downcast optimism surrounding BTC derivatives can be attributed to macroeconomic influences and regulatory uncertainties, even with numerous ETF applications submitted by major asset management firms in recent weeks.
Besides the recent 18-month highs, the premium for Bitcoin futures remains relatively modest compared to previous market interest, notably the 19% premium in October 2021.