Analysis of open interest in Chicago Mercantile Exchange’s (CME) bitcoin (BTC) futures shows that the unwinding of long positions appears to be in its end phase rather than its beginning. This was stated in a research report by JPMorgan on Thursday. Open interest refers to the total number of outstanding derivative contracts, such as options or futures, that have not been settled.
The report also mentioned that the correction in crypto markets in August, which reversed the post Securities and Exchange Commission (SEC) versus Ripple court decision rally, can be partly attributed to the broader correction in risk assets such as equities and tech. This correction seems to have been induced by frothy positioning in tech, higher U.S. real yields, and growth concerns about China.
JPMorgan further highlighted that the news of SpaceX writing off its bitcoin holding in the previous quarter acted as an additional catalyst for the correction in crypto markets. The note stated that these news caught up investors with an overhang of long positions.
Moreover, the SEC’s appeal against the district court’s ruling in the Ripple case could induce a new round of legal uncertainty for crypto markets. The outcome of the appeal is not expected until next year.
In conclusion, JPMorgan’s analysis of open interest in CME’s bitcoin futures suggests that the unwinding of long positions is nearing its end. The report also highlighted various factors that contributed to the correction in crypto markets, including the correction in risk assets, Elon Musk’s announcement about SpaceX’s bitcoin holding, and the SEC’s appeal in the Ripple case. The appeal could introduce legal uncertainty in the crypto markets.
