Who trades on CME? Funds hold more than 80 percent of CME bitcoin empty orders

A month ago, a Twitter user known as Documenting Bitcoin, which has nearly 190,000 Twitter followers, tweeted that hedge fund Fred Capital had a $7 trillion short position in Bitcoin.

While Documenting Bitcoin's figures are inaccurate, $7tn is actually Fred Capital's total assets. But it does remind us of a phenomenon we have to watch out for: institutional short bitcoin positions.

If you remember, in the midst of the battle between retail investors and Gamesstop shorts last month, retail investors discovered that an institution had a large short position in bitcoin on the Chicago Mercantile Exchange.

CME, on the other hand, is currently the largest compliant bitcoin futures trading platform.

Founded in 1874, CME is a wholly owned subsidiary of the Chicago Mercantile Exchange Holding Company. It is the largest financial derivatives exchange in the world. On December 18, 2017, CME officially launched bitcoin futures contracts, which are delivered in cash.

For compliant investors, CME's futures contracts are one of the few ways to leverage into bitcoin investments.

For example, on January 20, 2021, two BlackRock Fund companies, BlackRock Global Allocations Fund and BlackRock Funds V, stated in 497 Prospectus, a Prospectus filed with the SEC, that some of their Funds could participate in futures contracts based on bitcoin.

The prospectus also states that not all bitcoin futures contracts are investable, but rather those that are registered with the Commodity Trading Commission and settled in cash. Since the CBOE terminated its bitcoin futures product in June 2019, the BlackRock Global Allocation Fund and BlackRock Funds V currently have only access to bitcoin futures contracts available on the CME.

In the last six months, CME's holdings of bitcoin contracts have grown 284% from $665 million to $2.555 billion. As CME's holdings of bitcoin contracts continue to rise, the impact of CME's holdings on the bitcoin market is growing.

Photo source: bybt

Funds are major participants in CME bitcoin futures

Photo source: the CFTC

According to the latest CFTC data, the CME currently holds 52,860 bitcoin futures contracts (10,572 * 5) worth about $2.5 billion. CME has the second-largest holdings of bitcoin futures contracts in the world, behind Binance's 55,700, according to BYBT.

The CFTC divides users who participate in CME bitcoin futures contracts into 'reported positions' and' unreported positions. ' The latter are mainly small investors deemed unreportable by the CFTC and less influential in the market. The former is divided into "non-commercial positions" and "commercial positions".

Generally speaking, the main group of non-commercial holding positions is fund institutions, while the main group of commercial holding positions is hedging institutions, such as index funds investing in commodities. They are long in commodity investment, so they need to bet short in the futures market for hedging.

Funds (non-commercial holdings) are the largest holders of CME bitcoin futures, with 24 funds holding about 81.8% of short CME bitcoin orders worth about $2.03 billion, according to the latest CFTC data. The top four traders held 48.2 percent of the CME's empty bitcoin orders. Even on a net basis, the top four traders hold as much as 48% of CME bitcoin orders that are empty. Currently, 48% CME bitcoin totals about $1.2 billion.

Photo source: the CFTC

CME bitcoin futures are having a bigger impact on the market

Previously, Rhythm Blockbeats had been inWhy is the premium of grayscale GBTC only 2.77%? Is the representative organization short?One article said that some institutions through CME GBTC positive premium arbitrage.

Since GBTC is currently at a negative premium and cannot be redeemed, it has less impact on the spot market.

However, the CME's influence on the market has grown as institutional entry and investor interest in CME bitcoin futures has increased.

Traditional markets, such as the CME market, have closed hours, unlike cryptocurrency 7 x 24 hour trading. Therefore, it is easy to have a gap. (A gap is a period in which the price of a stock has not been traded during a rapid and large move. It shows a vacuum area in the trend chart.

The physical bitcoin market does not stop when CME bitcoin futures are closed, so when CME closes for the weekend, there will likely be a gap on the K-line when it opens on Monday. As attention on CME bitcoin futures builds, gaps created by the weekend's closure are often covered. Historically, more than 90% of the gaps in CME bitcoin contracts have been covered, according to statistics. Of course, historical data can only tell you a lot about the future, and can't tell you the probability of the next gap to be covered.

Ruling here to remind the majority of investors, this article does not constitute investment advice, only for exchange and discussion, investment risks, the market needs to be cautious.

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