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Record Breaking Interest – Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

Record Breaking Interest – Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

Record Breaking Interest - Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

Bitcoin futures providers have been seeing a lot of action during the last two weeks as cryptocurrency markets have been extremely volatile. Data shows there’s been significant open interest on both retail and institutional bitcoin derivatives exchanges and Skew research noted bitcoin options open interest was just shy of $1 billion on Monday. Two days later, CME Group reported that open interest in CME Bitcoin Futures touched a record high of over 6,600 contracts and there’s nearly 300 new trading accounts that have been added this year.

Also read: Bitcoin’s $10k Value Pushed Down by CME Futures Price Gap

Skew.com: ‘Spot Market Corrections Follow the Number of Outstanding Bitcoin Futures Positions’

BTC spot markets and bitcoin derivatives exchanges have seen notable price movements recently and a few speculators believe these two types of markets are well connected. During the first week of January 2020, bitcoin futures touched a three-month high and aggregated daily bitcoin derivatives volumes have been in the billions. This month, the spot price of BTC on Sunday, February 23 was around $9,940 per coin. Two days prior to the dump at $9,940 to $9,600 on Monday, CME Group’s Bitcoin Futures daily trade volume dropped significantly to $118 million. Monday was the lowest drop for CME in 2020, but the global markets exchange has seen a massive influx in open interest. The following Wednesday, CME Group tweeted that open interest touched a record high.

“CME Bitcoin futures (BTC) open interest reached a record high of over 6.6K contracts on February 19,” the global markets exchange tweeted. “Nearly 300 new trading accounts were added this year, as of February 24.”

Record Breaking Interest - Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

On February 26 after the price of BTC slid from $9,600 to $8,580, more than $150 million worth of BTC was liquidated on the trading platform Bitmex. The data analytics provider Skew from the website skew.com tweeted about a large number of liquidations that took place on Wednesday. “$150mln+ liquidations on Bitmex today – highest in 2020,” Skew disclosed.

Record Breaking Interest - Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

“Something is cooking,” the Twitter account @cinemaniac20 replied to Skew’s tweet. Skew has also recorded a number of derivatives market events during the course of the last two weeks. For instance, on Wednesday, Skew detailed that Okex hit a record number of BTC options “breaching the $15mln notional mark for the first time.” Today on February 28 as BTC spot markets have temporarily settled, the researcher tweeted:

As the market corrects so does the [number] of outstanding bitcoin futures positions.

Record Breaking Interest - Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

Do Bitcoin Futures Markets Provide Predictive Power for Future Changes in the Spot Price?

Even though BTC spot market prices have slid in value considerably, derivatives providers are seeing increased volumes. Bakkt’s physically delivered bitcoin futures has seen decent trade volume and open interest, but still has yet to surpass the 6,601 traded contracts the platform saw on December 18. On Wednesday, February 26, Bakkt did around half that number with 3,328 ($29.32 million) traded contracts. Open interest at Bakkt on Wednesday was around $11.2 million. Thursday’s Bakkt Bitcoin Monthly Futures only saw 2,163 ($19.34 million) traded contracts and open interest was roughly $11.88 million.

Record Breaking Interest - Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

At press time, BTC is down 2.95% in the last 24 hours and the coin is still down 56.7% from its all-time high of $19,600 on December 17, 2017. Speculators in 2017 believed the introduction of CBOE and CME Group bitcoin futures products helped propel the asset to almost reaching $20k. Despite the price hovering around $8,500-8,600 per BTC today, BTC is still up 14% over the last 90 days and 126% for the year against the U.S. dollar. There are far more bitcoin derivatives providers than in 2017 as well, even though Cboe stopped providing bitcoin futures products last year.

Record Breaking Interest - Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

A recently published paper written by researchers Seungho Lee, Nabil El Meslmani, and Lorne Switzer discusses the concept of pricing efficiency and arbitrage in bitcoin spot and futures markets. The study notes that bitcoin futures can “provide some predictive power for future changes in the spot price and in the risk premium.” Researchers studied the pricing efficiency of BTC using spot market values and CBOE and CME futures contracts traded from January 2018 to March 2019.

Record Breaking Interest - Observing the Predictive Power of Bitcoin Futures Over BTC Spot Prices

“The basis of Bitcoin is a biased predictor of the future spot price changes,” the study’s abstract summary notes. “Cointegration tests also demonstrate that futures prices are biased predictors of spot prices. Deviations from no-arbitrage between spot and futures markets are persistent and widen significantly with Bitcoin thefts (hacks, frauds) as well as alternative cryptocurrency issuances.”

A number of crypto traders believe futures markets can provide some predictive power for future changes in the spot price. An example of this notion is during the second week of February when the price per BTC was chopped down from over $10.2k to the $9,800 range. The drop followed the unfilled price gap that took place on the Chicago Mercantile Exchange (CME) Bitcoin Futures chart. Traders have noticed a number of “filling the gap” or “closing the gap” scenarios throughout 2019 and 2020. These events and the recent study shows a noticeable connection between bitcoin derivatives markets and spot trades.

What do you think about the record numbers bitcoin derivatives providers have seen in 2020? Do you think futures markets can provide some predictive power for future changes in the spot price? Let us know what you think about this subject in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.


Image credits: Shutterstock, Wiki Commons, Skew, Bakkt Volume Bot, CME Group, Fair Use, Wiki Commons, sciencedirect.com, Twitter, and Pixabay.


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@BakktBot, Bakkt, Bitcoin, Bitcoin derivatives, bitcoin futures, BitMex, BTC, CME Group, CME Group Open Interest, crypto derivatives, Cryptocurrency, Daily Volumes, derivatives, Digital Asset, Liquidations, Okex, Open Interest, Open Positions, Skew, Skew.com, Spot Markets, Spot Markets Dump, Traders, trading
Jamie Redman

Jamie Redman is a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source code, and decentralized applications. Redman has written thousands of articles for news.Bitcoin.com about the disruptive protocols emerging today.

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Actor Steven Seagal Fined by SEC for Illegal Promotion of ICO

Actor Steven Seagal Fined by SEC for Illegal Promotion of ICO

Famous actor Steven Seagal has been charged $314,000 by the Securities and Exchange Commission (SEC) this Thursday due to “unlawfully touting” an investment in a cryptocurrency project.

Seagal had promoted the project, stating that followers should get in on the Bitcoiin2Gen (B2G) project ICO as soon as they can. However, the actor had failed to disclose the $250,000 cash and $750,000 worth of B2G he was paid to promote the project.

Speaking on the matter is Kristina Littman, head of the Cyber Unit at the SEC’s Enforcement Division, who said:

“These investors were entitled to know about payments Seagal received or was promised to endorse this investment so they could decide whether he may be biased.”

Had Seagal simply disclosed his compensation, there wouldn’t have been an issue. Most celebrities disclose information like this by adding “#ad” to their tweets or other social media posts.

Celebrity-issued cryptocurrency scams are nothing new, though they often aren’t a willful means of doing so. Instead, most celebrities are unsure of the projects they’re promoting, especially in the case of confusing blockchain and cryptocurrency technology.

That said, as the industry has become more widespread and the world more aware of the potentially scammy nature of projects within the space, such promotions have been seen less and less as time has gone on.

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BitMEX Experiences $190 Million In Bitcoin Liquidation

BitMEX Experiences $190 Million In Bitcoin Liquidation

Skew, a data analytics provider that provides information regarding crypto exchanges, stated that around $190 million sell and $6.1 million buy liquidations have occurred in Bitcoin. When tallied, about $196 million in Bitcoin (BTC) has been liquidated in both long and short positions.

The Great Corona Scare

The fiasco started at around 14:00 UTC, on the 26th of February. From there, the price for BTC began to drop below $9000. Just an hour later, the BitMEX exchange saw its largest liquidation by amount since the new year, skyrocketing well past the $100 million mark.

The derivatives market mirrors a massive sell-off within the crypto spot market, with Bitcoin’s price dropping over 6% and recording a low of $8,675. A main attributing factor for this drop in the market, one that conventional markets suffer from, as well, is the coronavirus scare. Dow Jones Industrial, as well as the S&P 500, have experienced a 7% drop within this week.

Bearish markets All The Way

The latest price actions for BTC are continuing to show bearish results, despite the narrative that crypto can act as a safe-haven asset being heavily pushed. It seems that the average investor doesn’t consider crypto to be a safe bet in uncertainty regarding bonds and stocks.

Luke Martin, a research analyst in crypto, explained that Bitcoin doesn’t stand alongside any form of other assets. Should stocks start to drop, it doesn’t mean that crypto will automatically rise, according to Martin. He also compared Bitcoin with gold, stating that gold’s ebb and flow won’t cause an automatic reaction within the crypto industry, either.

Massive Downward Notional Volumes

BitMEX wasn’t the only one that felt the fears of the CORVID-19 virus. OKEx, recorded an options market notational volume uptick that clocked in well and above the $15 million mark. This is the largest uptick in the exchange’s history.

Notional volume signified the value of underlying assets within the derivatives market. It can mean the total cost of a position, an agreed-upon amount within a contract, or the amount of value an individual controls.

A massive amount of notional volume when it comes to the downward price, signals a bearish market movement overall.

Things aren’t looking good, as the world tries to push off all of its assets that aren’t capable of being quickly converted into funding. It seems everyone is very much scared of this new viral outbreak. How it will pan out in the future remains unclear.

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Law Firm Predicts More Lawsuits by the IRS Against Crypto Tax Evaders

Law Firm Predicts More Lawsuits by the IRS Against Crypto Tax Evaders

The IRS is actively cracking down on cryptocurrency users in the United States. Klasing Associates, a US law firm, expects there to be even more prosecutions in this department. 

When law firms weigh in on these matters, something must be brewing behind the scenes.

Don’t Mess With the IRS

According to Klasing Associates, the IRS will continue to crack down on crypto users.

Especially those who try to evade taxes will find themselves in legal trouble sooner rather than later. 

If true, such a move by the IRS would not come as too big of a surprise.

The agency has sent out Form 1040 with additional crypto-related questions for recipients to answer.

While most people will answer the questions honestly, some will try to game the system and risk it all.

Cracking down on those users filing bogus reports is a logical course of action.

Evading taxes is not what cryptocurrencies are designed for, or even useful for.

The transparent nature of public blockchains makes it impossible to avoid detection for long.

For the IRS, there is still a lot of work to do behind the scenes as well.

Finding a balance between enforcing regulation and taxpayer services will remain an ongoing challenge for the foreseeable future. 

Image(s): Shutterstock.com

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Israeli Crypto Wallet BT360 Shuts Down; Users Locked Out of Accounts

Israeli Crypto Wallet BT360 Shuts Down; Users Locked Out of Accounts

Popular cryptocurrency wallet in Israel, BT360, shut down its services on February 12 this year after which users have been unable to access their funds. The company suggests that it did so to check for financial irregularities.

Owner and CEO blame each other

The news of the shutdown and its consequences was revealed by fintech publication Calcalist last week. According to the Israeli outlet, the company’s owner Eyal Sadeh fired its CEO Erez Fischler. He said that the action came after finding irregularities in the way customer funds were handled. He also notified that the site had been shut down to check for these irregularities. Sadeh added that the services will be back online after the authorities give it a clean chit. Users will regain access to their accounts.

Israeli Crypto Wallet BT360 Shuts Down; Users Locked Out of Accounts

Israeli Crypto Wallet BT360 Shuts Down; Users Locked Out of Accounts

Calcalist also published Fischler’s point of view, which suggests that he has not done anything wrong. He claimed that he had quit the company weeks before the owner shut it down because of which he does not have access to customer accounts anymore. The former CEO also said that he could not be held liable for losses because he is not associated with the company any longer.

Users left in the dark

Decrypt also ran a story about this issue recently, featuring interviews from some users. One user named Paz suggests that both Eyal and Fischler are busy at pointing fingers at each other. The user reportedly went to the company’s office last week to enquire, but Fischler said that all computers were seized by the authorities. He even asked him to be patient while he was suing Sadeh for the mess. On the other hand, Sadeh denies any wrongdoing on his part.

Paz has about $50,000 stuck in his BT360 wallet and is one of many who have lost hundreds of thousands of their hard-earned money because of the ongoing issues.

Fischler doesn’t have a reliable history in the market. He reportedly owned a chocolate business that later went bankrupt. He was served with 40 debt claims as well. Israeli crypto exchange Bit2C operator Eli Bejerano noted that he lost an unspecified amount while working with Fischler last year. The two were working on launching a new crypto loan product.

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How to Hide Your Bitcoin – Opsec, Anonymity, Cold Storage, Brainwallet, Dexes and Non-Custodials

How to Hide Your Bitcoin – Opsec, Anonymity, Cold Storage, Brainwallet, Dexes and Non-Custodials

How to Hide Your Bitcoin - Opsec, Anonymity, Cold Storage, Brainwallet, Dexes and Non-Custodials

In an era of increasing economic uncertainty, surveillance, specialized cybercrime and hacking, knowing how to hide bitcoin safely has become a paramount concern for crypto holders. Whether it’s by way of taking wise opsec measures, utilizing noncustodial tools, leveraging a DEX, or even storing seed phrases in your brain, there’s no shortage of measures that can be taken to protect your stash. This article seeks to detail some of the best ways anyone can use to ensure their coins remain safe from bad actors.

Also read: Get Ready for the Bitcoin Halving – Here Are 9 Countdown Clocks You Can Monitor

Safekeeping for Sats

A “satoshi” is the smallest unit of bitcoin, and when it comes to the popular cryptocurrency, keeping one’s stash safe down to the last sat is important. For those new to the space — and perhaps even for more experienced hodlers who’ve overlooked certain security precautions and tips — what follows is a list of ways to ensure your stack of satoshis remains in good hands: your own.

Opsec Best Practices

Opsec, or operational security, is highly important when securing crypto holdings. It’s not sufficient just to have any old two-factor authentication (2FA), for example, as some variants of the measure like SMS-enabled 2FA can still leave easy attack vectors. SIM jacking is one example of this, and all that’s required is an overly cooperative and friendly customer service worker at a cellular provider.

When it comes to hacks like SIM jacking, where an attacker swaps your device data to a new SIM card by way of social engineering, phone number 2FA won’t help, and gives an infiltrator keys to whatever account is secured by that means. Instead, using a 2FA app such as Google Authenticator — and not a phone number, is a better bet. Be sure to disable SMS 2FA on sensitive accounts — especially crypto exchanges — and switch to a more secure option. When a phone number can serve as a key to your crypto safe, hiding bitcoins behind such info is a bad idea.

How to Hide Your Bitcoin - Opsec, Anonymity, Cold Storage, Brainwallet, Dexes and Non-CustodialsAxl Rose may be your favorite frontman, but using his name for a password over and over is not advisable.

For account passwords, usernames, pseudonyms, and other such information used for accounts, be sure to use unique and secure choices. Though you may be a huge Guns n’ Roses fan, having “Axl6969” as a password for everything probably isn’t a good idea. Trusted and verified password managers can make maintaining even a long list of unique and strong passwords fairy easy, and quality services allow users to keep their master password stored locally, and not on any central server.

Anonymity and Social Awareness

Where anonymity is concerned, be sure all records, memos, or other account information which might tie your real identity to accounts and usernames are encrypted. Phone numbers should not be given out publicly, and a secure virtual number service can be used to route public calls to your personal device. The more you secure sensitive information, the less likely it is a bad actor or social hacker will be able to connect the dots and gain access to your bitcoins.

Further, simply knowing when to keep quiet is a great tool for keeping bitcoins secure. As mentioned above, sharing a phone number publicly is not a good idea. Nor is exclaiming to the whole bar on karaoke night that you just made huge gains on Binance and are buying everyone a round. The more people know about your holdings, the more potential interest can be piqued in malicious actors who seek to gain as much info as possible to access accounts. This type of openness can even endanger personal safety, as one of the quickest ways to get to someone’s device for criminals may just be to steal it.

Cold Storage

Cold storage refers to storing bitcoins and their private keys offline for greater security. With private keys never being exposed to the internet, the security levels of cold storage options can be significantly higher than other avenues. Examples include hardware wallets such as Trezor and Ledger, which allow funds to be spent without private keys leaving the device, paper wallets created offline, and even more extreme options like fireproof seed phrase capsules. Perhaps most James-Bond-like of all the choices is storing a wallet in something hopefully not cold, but undeniably secure: your own mind.

How to Hide Your Bitcoin - Opsec, Anonymity, Cold Storage, Brainwallet, Dexes and Non-Custodials

Known as a “brainwallet,” storing a bitcoin seed phrase in your brain is definitely secure, as long as you don’t forget it or get mixed up. Using a mnemonic device such as a colorful, vivid story, particularly sharp bitcoiners can retain a 12-word seed phrase entirely in their heads. As with all such measures though, there’s a trade off. If you’ve got to run from a bad actor or flee the country and can’t take anything with you, this option is undeniably appealing. But beware: once forgotten, no customer service group on the planet is going to be able to help you retrieve the lost mental bitcoins.

Leveraging DEXs, Noncustodial Options

While popular centralized exchanges like Coinbase, Binance and Kraken can make getting into bitcoin easy, and even storing it for day-to-day transactions, it is never advisable to leave bitcoins sitting around online when not trading. Exchanges have been hacked multiple times, are subject to governmental regulation and technical difficulties, and as such are not secure for stashing sats. Once such an exchange is shut down, hacked, or frozen, so is your money.

How to Hide Your Bitcoin - Opsec, Anonymity, Cold Storage, Brainwallet, Dexes and Non-CustodialsCustodial exchanges and wallets are commons ways many users find significant amounts of bitcoin lost to the sands of time and chance.

Better options include decentralized exchanges (DEXs) with open source code and where software and network data is stored locally. Also, such networks allow for greater anonymity with minimal to no registration requirements, and can afford features such as encrypted chats for P2P trade and blind escrow. The Bisq network is one example of such an exchange. Local.bitcoin.com, another, is a peer-to-peer bitcoin cash marketplace where users need only to enter an email to trade BCH privately for a variety of traditional assets.

Where crypto wallets are concerned, noncustodial options (wallets where the private keys are solely in the user’s possession and are not centrally stored) are always best, as a seed phrase can restore the wallet if an accident happens or a device is lost. When it comes to custodial wallets, however, once the provider is compromised, so is the user. Always be sure to verify any wallet you are using is noncustodial, as the whole point of bitcoin is for you — and nobody else — to be in control of your money.

How to Hide Your Bitcoin - Opsec, Anonymity, Cold Storage, Brainwallet, Dexes and Non-Custodials

The Less Trust, the Better

Trust between humans can be a beautiful thing, but when it comes to stashing bitcoins, the less trust, the better. Satoshi himself cited this as the central issue concerning traditional financial systems. The Bitcoin creator noted “the inherent weaknesses of the trust based model” in the Bitcoin whitepaper, and developed the cryptocurrency in answer to these challenges.

When hiding your bitcoins, then, it’s always paramount to remember the reason for the asset in the first place: so you don’t have to trust any central entity to keep your money safe. At the end of the day things like customer service laziness at AT&T, human forgetfulness, and having to trust certain tools or developers may always be an issue, but the closer we can get the trust level to zero, the better.

How do you recommend hiding and securing your bitcoins? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.


Images courtesy of Shutterstock, A.PAES, fair use.


Did you know you can buy and sell BCH privately using our noncustodial, peer-to-peer Local Bitcoin Cash trading platform? The Local.Bitcoin.com marketplace has thousands of participants from all around the world trading BCH right now. And if you need a bitcoin wallet to securely store your coins, you can download one from us here.

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Anonymity, Bitcoin, brainwallet, cell phone, Centralized Exchange, Cold Storage, Cryptocurrency, Cryptosteel, DEX, Hack, Hide, Noncustodial Wallet, Opsec, Paper Wallets, Password Manager, Privacy, Satoshi, service provider, SIM, SIM Hack, sim jack, SMS, Social Engineering, Virtual Phone Number, Whitepaper
Graham Smith

Graham Smith is an American expat living in Japan, and the founder of Voluntary Japan—an initiative dedicated to spreading the philosophies of unschooling, individual self-ownership, and economic freedom in the land of the rising sun.

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