Nobody has a crystal ball, but the hype around crypto trading and Bitcoin is not going away anytime soon. Companies like PayPal and Square are at the top of the decentralized payment environment and continue to provide mechanisms with different payment methods. The banks are not that far behind. The mobility of Zelle in the banking system may eventually lead to stronger bonds between cryptocurrencies and critical financial institutions. Additionally, you can see that the mainstream regulated futures exchanges in the United States are experiencing higher volume levels, which reflects the continued demand for Bitcoin investments.
Bitcoin Futures Contracts Continue to See Rising Popularity
The continued increase in bitcoin futures volume, along with rising open interest, is a good sign. According to the Chicago Mercantile Exchange, daily trading volume surged by 570% to 1.32 billion. According to data source Skew, the total daily volume of futures contracts on major futures exchanges surged to $43 billion, a 186% increase. Total open interest rose to $5 billion. The upward trend in volume and open interest on the Chicago Mercantile Exchange and other global futures exchanges reflect a more robust demand for crypto trading and a product that will allow investors to speculate on Bitcoin.
Exchange Trade Funds
The upward momentum in volume is likely to lead to further advances in investment vehicles. In the United States, Gary Gensler, the head of the U.S. Securities and Exchange Commission (SEC), told investors that he might be more open to a Bitcoin ETF if it held Bitcoin futures rather than the cryptocurrency itself. This theory may likely be advanced quickly. In the wake of Gensler’s comments, two companies issued filings for the ProShares Bitcoin Strategy ETF and Invesco Bitcoin Strategy ETF, which might be the first of several looking for SEC approval. The structure could generate some consternation, as an ETF focused on Bitcoin futures would require that investors pony up a substantial amount of money on margin to trade. Since the futures contracts are already regulated by the Commodity Futures and Trading Commission (CFTC), which is part of the SEC, it could make for an interesting underlying asset for an Exchange Traded Fund.
Some products are available that track the movements of Bitcoin, which are configured as trust but are not ETFs. Grayscale investment trust for Bitcoin tracks the movement of Bitcoin but is configured similar to the SPDR Gold Trust, which holds physical gold. The configuration of the trust allows accredited investors to purchase the trust with a minimum of $50,000. If you buy the trust as a private placement, you can buy as little as one share. This has helped provide more access to crypto trading.
Technical Analysis
The daily chart of Bitcoin shows that prices put in a triple top throughout the latter portion of Q1 and most of Q2 before falling through support and making a new range. Prices are now testing the upper end of the new range forming a bull flag continuation pattern in a pause that refreshes higher. A close above trend line resistance near $43,000 may push prices back to the bottom end of the old range, which had the floor near $48,000.
In early August, the 20-day moving average crossed above the 50-day moving average, which shows that a medium-term uptrend is now in place. A moving average is the average of the last days in the period. For example, a 20-day moving average is the average of the previous 20-days. On the 21st day, the first day is dropped from the average calculation. Support for Bitcoin is seen near the 20-day moving average and the 50-day moving average close to $36,000.
Daily momentum is mixed. The fast stochastic is printing near the upper end of its range near 80, nearly in overbought territory. Reading on the fast stochastic above 80 is considered overbought, while a reading below 20 is oversold. The recent crossover buy signals and sell signals show that prices are consolidating in a tight range. Medium-term positive momentum has decelerated as the MACD (moving average convergence divergence) histogram remains in positive territory with a declining trajectory which points to consolidation.
The Bottom Line
The upshot is that Bitcoin may experience more activity as more products become available and volumes continue to rise. Robust futures contract trading on the CME could give rise to an ETF tied to futures contracts. The introduction of the ETF will allow more people access to Bitcoin and help increase the opportunity to trade Bitcoin prices. Since Bitcoin has an algorithm that produces fewer coins over time as more are created, the price could be forced higher through time, especially if demand continues upward trending.
