The price of Bitcoin has broken out of a three-year descending trendline dating back to December 2017. Now, two key data points show that institutional investors are increasingly getting involved in the cryptocurrency market.
First, the total open interest and volume of the CME Bitcoin futures market reached a one-year high, according to data from Skew.
Second, the assets under management (AUM) of the Grayscale Bitcoin Trust is at a record high. The total AUM of all Grayscale’s products combined is also at an all-time high.
The growing involvement of institutional investors coincides with the recent breakout of Bitcoin from a dreaded extended price range.
Bitcoin surpassed the top of the trendline of the chart shared by Jason Williams, the co-founder of Morgan Creek Digital. Bitcoin rose to as high as $11,420 on Coinbase, on July 27. The top of the multi-year trend line was around $10,900, which BTC broke out of with ease.
CME Bitcoin Futures Demand Spikes
Market data from Skew shows that the total open interest of the CME Bitcoin futures market surpassed $700 million.
The term open interest refers to the value of all short and long contracts in the market combined. When the open interest is high, it typically suggests that many investors are anticipating a big price movement.
The CME Bitcoin futures data is significant because it tailors to accredited or institutional investors. CME is the world’s largest derivatives company based in the U.S. that is strictly regulated.
When the CME Bitcoin futures open interest substantially increases, it shows the activity of accredited or institutional investors is rising.
“CME Bitcoin futures had most active session of the year yesterday, $1.3 billion notional traded Open interest also climbed to record high and getting closer to the top of the table,” researchers at Skew explained.
Grayscale Sees Continuous Demand From Institutional Investors
Atop the CME data, the continuous increase in the AUM of Grayscale indicates growing demand from institutional investors.
The AUM of Grayscale is essential in analyzing institutional activity in Bitcoin. There are a few vehicles that institutions can use to gain exposure to cryptocurrencies. The Grayscale Bitcoin Trust is one of the few publicly-traded investment vehicles that tailor to institutions.
In its second-quarter report, Grayscale said 81% of returning institutional investors allocated to other products. In the first quarter, the investment firm said the majority of investments came from institutions, amounting to 88%.
The firm’s report reads:
“In 2Q20, new investors accounted for $124.1 million of inflows and 57% of the investor base, up from 49% during the T12M. Additionally, 81% of returning institutional investors in 2Q20 have now allocated to multiple products, an increase from T12M of 71%.”
Grayscale also emphasized that inflows into its cryptocurrency products crossed $1 billion in the first half of 2020. The company said:
“For the first time, inflows into Grayscale products over a 6-month period crossed the $1 billion threshold, demonstrating sustained demand for digital asset exposure despite a backdrop characterized by economic uncertainty.”
Due to varying macro factors and on-chain data, some investors expect Bitcoin to continue its uptrend. Billionaire Mike Novogratz said he foresees BTC surging to $20,000 by the year’s end. Crypto trader Brian Krogsgard said he expects BTC to “challenge” previous record highs next year.