Bitcoin (BTC), a flagship cryptocurrency, reached yet another all-time high of over $82,000 and futures premiums surged, in a strong indicator that investors believe the record-run in the largest digital currency is set for even greater gains following the U.S. elections that saw many pro-crypto candidates being able to win office.
Open interest in BTC price exceeding $90,000 rose to over $2.8 billion on the Deribit derivatives exchange, a crypto platform that provides futures trading.
Deribit covers most of the overseas options market.
Vetle Lunde, head of research at K33 Research, shared with CNBC that the options market’s bias is toward continued momentum.
Lunde added that call options trade at “a premium to puts, and open interest in out-of-the-money calls has grown.”
A call option allows the buyer the right to acquire shares of an asset at a set price for a certain period of time. Acquiring a call option is a type of bet the asset price should surge higher. Purchasing a put option is a bet the asset price should fall.
The CME derivates exchange provides BTC futures contracts and is a way for institutions to make bets on the future price of the leading crypto.
Velde informed CNBC that this past Friday CME premiums for ETH and BTC averaged 14.5% and 14%, respectively.
Ahead of the election, Velde noted that these premiums were at 7%, and had spent most of the last half year at slightly less than 10%.
He further explained that the recent surge is “a meaningful deviation higher emphasizing the bullish flows of late.”
He added that yields stabilized into the double digits following the election.
The early price movements of bitcoin came with considerable growth in open interest in perpetual swaps which are contracts that let buyers speculate on where they believe prices are going without a fixed expiration date.
However, the liquidity in crypto markets over the weekends is poorer than during business days because CME futures and ETFs are not open to trade, so moves can often overreact and retrace after these markets open once again, Velde said.
Many industry analysts now claim that Bitcoin may reach $100k prior to the inauguration if Trump actually delivers on pro-crypto campaign pledges.
Trump promised on the campaign trail to turn the US into the “crypto capital of the planet.” His claims to the crypto community included introducing a national crypto stockpile with the $16 billion+ in bitcoin the U.S. government has amassed via asset seizures, and slashing interest rates. The easing of monetary policy tends to dovetails with a rise in crypto prices because it makes it more affordable to borrow capital.
The Federal Reserve, which is responsible for the nation’s monetary policy, establishes the benchmark rate.
The Fed operates independently from the White House. This past Thursday, the Fed had approved its second straight interest rate cut.
Following the election results and the Fed’s vote to cut the benchmark rate, the crypto markets surged into the weekend.
Ether notably outperformed bitcoin’s rise, up a considerable 30% in the past week.
The total market cap of all spot bitcoin ETFs is over the $80 billion mark at the time of writing and in the past three trading days, the spot funds added a whopping $2.3 billion.