- Bitcoin price ascent continues today to a high so far of USD 9,621
- Significant futures contract expiry today, 50% of open interest, could determine where price goes next
- White paper detailing digital dollar is released by a US think tank
Bitcoin continues in its steady ascent today, with a high so far of USD 9,621 (CoinDesk) showing the bears that technical resistance at USD 9,200 will soon be overcome en route to USD 10,000.
Crypto analysts, however, are asking us to mind the price, given that today is a particularly important day to end the weekend, even as the rally looks to hold, having broken out of the falling wedge pattern from mid-week.
These are now the levels of price we were at from two weeks ago, but crypto analysis firm Skew says that the futures market is what is driving this uptrend, with a huge number of Bitcoin futures contracts, including some USD 184 million worth on the Chicago Mercantile Exchange (CME), ready to expire today. Skew warned to watch for increased volatility, saying:
“23k #bitcoin equivalent futures and 10k #bitcoin options are set to expire this Friday on CME. Approx 50% of open interest for each product Watch the rolls!”
23k #bitcoin equivalent futures and 10k #bitcoin options are set to expire this Friday on CME.
Approx 50% of open interest for each product
Watch the rolls! pic.twitter.com/r3niIa1BnY
— skew (@skewdotcom) May 26, 2020
Based on their own collated data, this means that 23,0000 BTC in futures contracts and 10,000 BTC in options will expire today, which represent together about half of the open interest for each of the products.
Traders are expected to roll over these contracts, that is, selling them before they expire to buy other contracts with later expiries, and effectively hold on to their positions. And as we know, sells usually mean a downward pressure on Bitcoin — even though CME markets actually are cash settled and not physically settled (that is, not using actual Bitcoin). Nevertheless, even if they do result in a dip, it should only be temporary as in the past, given that their market share is really a small drop in the global ocean.
Crypto commentator Marcel Pechman told Cointelegraph that he prefers watching to see if future price will be expected to be better than spot price (contango), explaining:
“If we break USD 10,000, this adds buying power for call options but I like to monitor contango more than funding rate in order to see how the curve of next futures contracts is priced vs spot. In my opinion, the bigger the futures premium, the more bullish big investors are.”
The Unites States pursuit of a possible central bank digital currency (CBDC) might also be getting a boost today as US think tank Digital Dollar Project released a 30-page white paper that details the potential applications of such a CBDC.
It lays out the groundwork for what it thinks is a digital dollar, and what it would be able to progrss on. A co-founder, former chief of the Commodity Futures Trading Commission (CFTC) fintech department, Daniel Gorfine, said to Cointelegraph:
“What we’ve been trying to do through the digital dollar project is catalyze action and this paper is a key step in that direction.”
Former CFTC Chair, Christopher Giancarlo, is also working side by side with regulators and current operators of payment mechanisms such as cash and Automated Clearing House Technology, so it is clear that former regulators do see the worth of a digital dollar.
One important use case is the huge remittance corridor between the US and Mexico, but also hopes to try out more trials in these use cases separately. It explained:
“Through engagement with stakeholders, the public sector, and our advisory group, we intend to refine these use cases further and identify potential pilots to test the value hypotheses and inform design decisions.”
Gorfine did say that the project could explore tokenization and how it would affect access and financial inclusion, but also separately examine state programs that would disburse benefits to individuals. The digital dollar would be partially decentralized also. He added:
“Relying primarily on the private sector and regulated banks and money transmitters seems like a much better approach. Public solutions would only make sense if there are remaining gaps and problems to solve for. […] If you think about the way the Fed developed, it was attempting to decentralize the federal banking system and related policy decisionmaking.”
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