At 0600, 13/7/18, CBOE /XBT August 18 Futures experience two large orders of 13,300 & 5,000 contracts respectively. The minimum size for a block trade is 50 contracts. No individual may control more than 5,000 contracts themselves.
CBOE trades another 4,200 contracts between 2 and 3:30
Total daily volume reaches 21,834 contracts, the highest daily /XBT volume traded at the Chicago Board Options Exchange
I noticed some very suspicious volume on the CBOE /XBT Aug 18 futures that totals to the amount of approx 22,000 contracts, which amounts to approx $162,800,000 USD assuming 1 BTC = $7400.
Here is a chart detailing the daily timeframe, clearly showing the 22,000 contracts in volume: i.imgur.com/zKY2ipp.png
Here is a 1 minute chart. This chart is very interesting as we can see the majority of the volume is coming from successive blocktrades of 500 contracts: i.imgur.com/4Z1jrVC.png
The total sum equates to ~$162,800,000, and considering they are all trades of 500 contracts at the same time, I assume these are all being made for/by the same individual.
Additionally, its interesting the amount of slippage that occurred in this trade. This is NOT what an institution would usually do. However, given the limited number of products that can be used to hedge bitcoin, it may be an institutional investor.
Finally, the timing of this trade relative to the spot price of BTCUSD gives us the largest clue as to what may be happening. With news of Bitcoin ETFs coming, it's possible that an institution has purchased a large sum of BTC spot and is opening a large sum of short future positions to hedge these assets until they are required. It's possible that they shorted the CBOE XBT contract first, and then later bought an equal sum of BTC (spot) valued at +$162,800,000 USD which caused the large spike in price over the last few days. It's also important to realise that this position may not be a complete hedge, and in fact the individual may have only hedged a quarter of the spot position, leaving them with positive BTC spot delta exposure.
The /BTC contract at the Chicago Mercantile Exchange (CME) did not see any irregular volume. Here is a screenshot of the CME contract for reference: i.imgur.com/CmG40dz.png
Here you can see the contract spec for the /XBT futures contract at the CBOE. Note that no 'person' can control more than 5,000 contracts and that blocktrades have a minimum requirement of 50 contracts:
this has nothing to do with the expiry of the contract.
I noticed that there was a massive spike in irregular volume on the CBOE futures for bitcoin, which is indicative of institutional activity.
I believe that they could be 'futures hedging' that uses a short position on futures and a long position on the spot market, to eliminate upside and downside risk. For example, I buy 1 bitcoin from bitfinex, and I sell short one contract on CBOE bitcoin futures. If the price of bitcoin falls $100, my short position will gain $100, which counterbalances my loss from the bitfinex bitcoin.
As I have found 22000 contracts in volume on the CBOE bitcoin futures, I believe, that there is a possibility that someone is trying to hedge or 'cover' 22000 bitcoins.
This would explain the large price increase over the last few days.
:)
Anything else just let me know
kitkat16
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@Wacc, really appreciate the explanation, thankyou! :)
@Wacc, thanks bud, I'm fairly new to this, but this has helped me understand your theory :)
So what woud your course of action or recommendation be in this case? Would you say this increasing interest in BTC and crypto in general makes this a good opportunity to buy if you're planning on holding long term? I'm not into short or even day trading at all, but I'm a tech guy and a crypto enthusiast and would like to invest in a few coins I believe in. But these major up and down swings make it a bit scary for me to take this step.
TL;DR if you're planning on holding (very) long term, is now a good time to buy or should we wait until a clear trend has formed? Thanks, mate!
If you’re planning on holding for a very long time, 5800-6000 is a level where I would be comfortable to hold bitcoin through the large swings, and the majority of my alt holdings were purchased around that level.
At this point, we can only tell what institutional activity has occurred in the past. It’s possible that more positions are opened, and more Bitcoin is purchased, however we can’t say for certain.
Retracements are expoafter a move like this, and a higher low might be your chance to enter the market.
It all depends on how confident you are in crypto and bitcoin. The best time to plant a tree was 20 years ago. The second best time is now.
@Wacc, thank you! That's great not financial advice :-)
Do you think BTC will retrace back to 5800-6000? I've done my own research (with my very limited skills and knowledge of course) and I was almost certain that BTC would hit that low, but this recent price spike confused me a lot. Do you think this will only delay the inevitable 5800 low or did this change everything?
Of course I'm not looking for financial advice and I know it might be too early to draw conclusions from this spike. Just curious what your gut tells you :-)
I think its too early to come to any conclusions. I think the safest strategy would to be trade the zone between here and 7800 if BTC breaks above, and the zone between here and 6700 if it breaks below.
I trade mostly based on fundamentals, and the fundamentals look good from here.
The 5800-6000 level could probably be retouched again as it has been many times before, however in the case that it doesn't, you need to identify it and take appropriate action!
Thanks again.
timn91
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@Wacc, I'm not a trader so trading zones isn't really an option for me. I think I'll wait and see if the price corrects back down to somewhere close to 6,000 and then get in. Even if it's a few hundred $ above 5,800. If BTC goes where I think it will, it won't matter if I bought in at 6,500 or 5,800 :-) And like I said, I'm looking to invest LONG-term, not ride a trend for a couple of months.
Are you saying the August 18' futures have an expiration target of $7400?
Thanks very much for posting! Following :)