Report: CME Bitcoin Derivatives Traders 'Sold Out' As BTC Breaks $55,000

Bitcoin (BTC) derivatives traders on the Chicago Mercantile Exchange (CME) are missing out on big profits as the spot price of bitcoin topped $55,000 this week.

According to data shared by Ecoinometrics, retail investors reduced their long exposure to the Bitcoin futures and options markets at the end of September. The number of open short positions is also climbing, indicating that derivatives traders expect the price of Bitcoin to fall, as shown in the chart below.

The data was taken on Sept. 28, when the price of BTC on Coinbase had fallen below $41,000, down nearly 23% from its month-to-date high of $52,950. The drop follows China's decision to ban trading in various cryptocurrencies.

Ecoinometrics analyst Nick said: "The most likely reason for the decline in bitcoin prices is that some traders did not transfer their long positions to the October contract, and some traders looked like bitcoin will fall below 40,000 last week. Close the position directly when the dollar is traded.”

"Anyway, the general picture is that futures traders lack confidence and they're sold off," the analyst noted.

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Institutional investors in the CME Bitcoin futures market also followed the sentiment of retail investors, reducing their long exposure in the market. But, on the other hand, their short positions are climbing.

Puts (an implicit bearish bet on the price of bitcoin) were almost twice as numerous as calls (bets that the price of bitcoin could rise) as CME options traders believed the price would fall.

The distribution of positions among traders makes $40,000 the most likely strike price target.

On the other hand, some options traders are betting that the bitcoin spot price will hit $60,000 by the end of October. In addition, analyst Crypto Hedger emphasized that Bitcoin options due to expire on November 26 show that bullish sentiment is biased towards the exercise target of $80,000.

Konstantin Anissimov, executive director of CEX.IO, said: "At the current rate of rise, Bitcoin has formed very strong support at the price of $50,000, and short-term traders may also need to pay attention to the key resistance around $56,000." He added:

“A break below or above these levels could trigger another catastrophic price reversal, with bitcoin heading towards $60,000 in Q4.”

Bitcoin's supply squeeze is in play

On-chain data shared by Ecoinometrics also shows high levels of Bitcoin withdrawals across all cryptocurrency exchanges.

In detail, Bitcoin’s 30-day net outflows have been on the rise since July 2020, as shown in the color-coded chart below, with blue and red indicating extreme outflows and inflows, respectively.

Ecoinometrics noted that the amount of Bitcoin leaving exchanges is currently higher than in previous four-year halving cycles.

At the same time, traders believe that the reduced supply of Bitcoin on exchanges as "holding" activity increases will further exacerbate the liquidity crisis and price increases.

Ecoinometrics emphasized: “There were indeed some periods when there were net outflows, but in terms of scale, they look far less than what we are seeing now.”

"It's another sign that we're headed toward a liquidity crisis, which could push the value of bitcoin much higher than it is now."