Are catalysts for further increases coming? A major Bitcoin transaction makes a comeback!

The record rebound of Bitcoin has made one of the most popular trades for cryptocurrency hedge funds more profitable than ever, which may help drive this digital currency further up to unprecedented heights. Since Trump won the U.S. presidential election last week, Bitcoin has risen about 25%, and under a more favorable cryptocurrency policy, Bitcoin briefly approached the $90,000 mark on Tuesday. This pushed the spread between Bitcoin futures and spot prices to its highest level since March, when the spot Bitcoin ETF was approved and Bitcoin prices soared to previous historical highs. Hedge funds have long sought to profit from this price difference known as "basis trading," where they buy Bitcoin in the spot market and sell futures contracts to lock in the difference between the two prices. By doing so, this frenzy could further drive up prices in the futures market. Ravi Doshi, head of markets at the brokerage firm FalconX, stated, “Market participants are eager to make long bets on further increases in the crypto space through leverage in futures and options. The annualized basis curve for November expirations has risen to over 18%, highlighting the insatiable demand for margin during the crypto market's explosive period.” According to data from CF Benchmarks, the basis on the Chicago Mercantile Exchange (CME) is currently close to 18%, with the recent contract basis for Bitcoin futures listed on the exchange exceeding that of other derivatives platforms. Thomas Erdösi, product director at CF Benchmarks, said, “Institutions may now seek to exploit the price difference between futures and spot prices for arbitrage.” Leverage in the cryptocurrency market is also soaring, with open positions in both the futures and options markets at high levels. CME's Bitcoin futures contracts are one of the most popular ways for U.S. institutional investors to increase leverage, while overseas traders often use perpetual contracts and options from some exchanges to place bets. “At these levels, traditional financial institutions will lend dollars to the cryptocurrency market by shorting to achieve an annualized return of 18% before the end of November,” Doshi said. “As yields continue to expand, FalconX's derivatives trading desk has seen strong interest in this trade.” Bitcoin options traders have set their sights on the $100,000 milestone price for this original cryptocurrency. According to data from the cryptocurrency options exchange Deribit, investors are lining up to bet that Bitcoin will break this milestone before the end of the year. On Monday, Deribit data showed that there were open positions of 9,635 Bitcoin (worth about $780 million) betting that Bitcoin will reach $100,000 before December 27. This is the largest bet on any trade for that expiration date. Deribit has set the probability of this trade being successful at 18.6%.