Large Bitcoin Futures Gap Causes Temporary Trading Pause, ETH Open Interest Hits All Time High
December 30th, 2020
CME Group temporarily paused trading of bitcoin futures after the market opened to a large gap of over $3,000 between the derivatives and the underlying crypto asset.
According to a report, it was this huge futures gap which “amounted to a massive upside volatility” that led to the trading pause. Futures gaps are caused by information or changes in investor sentiment that occur when the market is closed or not trading.
The reported large CME futures gap occurred when bitcoin, which is traded every day on spot markets, rallied to a new all-time high of $28,422 before retreating.
Before the weekend rally, bitcoin trading on December 24 had peaked at just under $25,000. The difference between the Thursday high and the new all-time high resulted in the large discrepancy between the spot and futures market when trading on CME resumed on December 28.
Due to the misaligned trading periods between spot and futures markets, such gaps, which can either be negative or positive, will always exist. Enterprising traders can interpret and exploit these gaps for profit.
In the meantime, as CME experienced the unusually large gap, the team at Bybt were reporting a new all-time high ETH open interest of $2.21 billion. The new December 27 record comes after the ETH price went past the $700 mark for the first time since May 2018. Starting November 28, ETH has surged by almost 40% from $537.80 to $745.05 by December 28. However, at the time of writing, the token had treated to $729.50.
Meanwhile, as one report explains, the ETH rally appears to be linked to “the high number of tokens staked before the Ethereum 2.0 launch on December 01.” Furthermore, the report, which sites Dune Analytics data, adds that “more than 1.4 million ETH has been locked up.” Further, the derivatives exchange CME Group will be launching ethereum futures in February 2021, pending regulatory approval.