Bitcoin hit an all-time high above $81,000 on Monday, and futures premiums skyrocketed.
TakeAway Points:
- The price of bitcoin hit a new all-time high of around $81,000 and above.
- As a result of elections that saw a wave of pro-crypto candidates win office, futures premiums skyrocketed, indicating that investors think the record run in the biggest cryptocurrency in the world is set to continue.
- The well-known Deribit derivatives market, one of the few cryptocurrency-native platforms that allows futures trading, saw an increase in open interest in bitcoin’s price, which was trading above $90,000.
Cryptocurrencies see increase in price
This indicates that investors think the world’s biggest cryptocurrency’s record-run is certain to continue after a wave of pro-crypto candidates won office in the U.S.
Open interest in bitcoin’s price surpassing $90,000 rose to more than $2.8 billion on the popular Deribit derivatives exchange, one of a few crypto native platforms that offers futures trading. Deribit encompasses most of the offshore options market.
“The options market’s bias is heavily toward continued momentum. Call options trade at a premium to puts, and open interest in out-of-the-money calls has grown,” Vetle Lunde, head of research at K33 Research, said.
A call option gives the buyer the right to buy shares of an underlying asset at a certain price for a specified period of time. Buying a call option is a bet the asset price will move higher. Buying a put option is a bet the asset price will fall.
Bets on future price of Bitcoin
The CME derivates exchange offers bitcoin futures contracts and is a popular way for institutions in the U.S. to make bets on the future price of bitcoin. Velde said that on Friday CME premiums for ether and bitcoin averaged 14.5% and 14%, respectively. Ahead of the election, Velde says these premiums sat at 7%, and had spent a majority of the past half year hovering slightly below 10%.
“The recent surge is a meaningful deviation higher, emphasizing the bullish flows of late,” he added, noting that yields more or less stabilized well into the double digits after the election became clear.
“Alongside the growth in leverage, we saw the first meaningful example of growing yields in offshore derivatives, indicative of the move being led by determined risk-takers positioning for further upside,” said Velde.
The early innings of bitcoin’s push higher coincided with substantial growth in open interest in perpetual swaps, or contracts that allow buyers to speculate on where they think prices are headed without a set expiration date.
But liquidity in crypto markets on weekends is typically poorer than during weekdays, as neither CME futures nor ETFs are open to trade, so moves thus tend to overreact and substantially retrace once these markets open again, according to Velde.
US to be the crypto capital
President-elect Donald Trump promised on the campaign trail to turn the United States into the “crypto capital of the planet.” His multiple pledges to the crypto community included launching a national crypto stockpile with the more than $16 billion in bitcoin the U.S. government has amassed through asset seizures, as well as slashing interest rates. The easing of monetary policy typically dovetails with a surge in crypto prices since it makes it cheaper to borrow money.
The Federal Reserve, which guides the country’s monetary policy, sets the benchmark rate. It also, by design, operates independently from the White House. On Thursday, the Fed approved its second consecutive interest rate cut.
On the back of election results and the Fed’s unanimous vote to again slash the benchmark rate, the crypto market broadly surged into the weekend. Ether eclipsed bitcoin’s rise, up 30% in the last seven days, and solana’s market cap topped $100 billion on Sunday.
The total market cap of all spot bitcoin ETFs is now above $80 billion, and in the last three trading days alone, the spot funds collectively added $2.3 billion.
Within fintech, companies tied to crypto were some of the top performers, after candidates funded by the crypto industry won races up and down the ballot.
