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At the beginning of this month, Bitcoin surged by $50,000, reaching a colossal market capitalization of $1 trillion and adding over 30% in the last three weeks.
Against this backdrop, the open interest in Bitcoin futures successfully reached a new annual high, and such levels have not been observed for at least the past 27 months. This review will discuss this and potential growth factors for the leading cryptocurrency in the coming months.
The open interest in Bitcoin futures has reached a new 27-month high, last observed in November 2021. Open interest typically serves as a measure of the total value of all outstanding or "unsettled" Bitcoin futures contracts on exchanges. It is an indicator of increased market activity and trader sentiment surrounding a specific asset.
The value fixed by Bitcoin futures confirms that around this time, there was an uptick in trading activity in the Bitcoin network. According to CoinGlass data, on Monday, BTC futures precisely showed a cumulative open interest of $22.9 billion.
This figure is quite close to the previously recorded peak of around $24 billion. In less than two months, open interest in Bitcoin futures has grown by 30%.
This event aligns with the rise in the price of Bitcoin to $52,106.42 according to the current market value. Bitcoin has registered a price increase of 23% since the beginning of the year, reaching a level not seen since December 2021.
The increase in Bitcoin prices is attributed to several factors, including the recent entry of institutional investors into the market through spot ETFs and the long-awaited halving event, scheduled for mid-April.
Spot Bitcoin ETFs, approved by the U.S. SEC in January, have achieved significant success in recent weeks. Bitcoin ETFs surpassed the rating of 3,400 existing ETFs with an outflow of $2.3 billion last week.
In total, the net outflow registered by ten ETF issuers exceeded $5 billion. Regarding inflows, the leading asset management company BlackRock sets the pace, with other major issuers closely following suit.
On the other hand, the total open interest in Ethereum futures is $10.5 billion. Current data shows that the supply has increased by 50% since the beginning of this year.
The rise in Bitcoin prices equally exerts a ripple effect on Ethereum, as well as all other cryptocurrencies. Consequently, ETH is also trading above $2,900 after a growth of more than 14% over the last 7-day period.
Demand for Bitcoin ETFs accelerated again last week, accumulating a record $2.4 billion out of $2.45 billion directed towards investment products in digital assets, as reported by the cryptocurrency asset management company CoinShares on Monday.
Investments in recently approved spot Bitcoin ETFs in the United States surpassed outflows of $623 million from Grayscale's Bitcoin Trust (GBTC), a functioning fund that transformed into an ETF structure. Over the past week, IBIT BlackRock and FBTC Fidelity attracted $1.6 billion and $648 million, respectively.
"This represents a significant acceleration of net inflows, distributed widely among various providers, indicating an increasing interest in spot-based ETFs," noted James Butterfill, Head of Research at CoinShares.
The sharp surge in demand for new Bitcoin ETFs occurred after BTC reached $52,000 for the first time since December 2021, and investors anticipate new record highs for the leading cryptocurrency later this year.
Weekly inflows into a broader class of crypto assets also reached a record, as highlighted in the CoinShares report. Bitcoin accounted for 99% of the total net inflow into crypto funds, and Ethereum (ETH) products received the second-largest inflow at $21 million.
Bitcoin's rise has prompted the market to consider when it will reach an all-time high. With only a 32% gap remaining to the $69,000 peak set in 2021, the crypto community identifies several bullish factors that could propel Bitcoin to new all-time highs before summer: halving, ETFs, elections, and Treasury.
The analytical firm IntoTheBlock's report suggests an 85% probability that Bitcoin will reach a new record high within the next six months. The firm's Head of Research, Lucas Outumuro, said this forecast is based on five catalysts that could drive Bitcoin growth in the coming months.
The first catalyst is the long-awaited April Bitcoin halving, which is expected to halve the rewards for BTC miners. Experts believe that miners are well-prepared for this event, and the historical peak of Bitcoin may be reached just a month after the halving. Additionally, this will reduce selling pressure after the halving, as the inflation rate of BTC emission will significantly decrease.
The second catalyst is the fresh inflow of funds from recently approved Bitcoin Exchange-Traded Funds (ETFs), which have already attracted about $4 billion in new investments within a month of their launch. This massive inflow may boost demand for Bitcoin, especially in connection with the reduction in Bitcoin issuance after the halving.
The third factor will be the anticipation of a Federal Reserve interest rate cut, which may potentially begin in March. Traders are counting on such a rate cut, which could lead to increased liquidity in financial markets, benefiting assets like Bitcoin and stocks.
The fourth factor is the upcoming U.S. presidential elections. It is expected that the Federal Reserve may take steps to support the economy ahead of these events, which could potentially impact market dynamics.
Finally, experts predict that companies worldwide will accumulate Bitcoin in the coming months, and spot ETFs will make Bitcoin more accessible. This trend of companies using Bitcoin for their treasury obligations, especially in Asia and South America, is expected to spread nationally due to the legitimacy brought by ETFs in the U.S.
Additionally, the prospect of institutional treasuries investing in Bitcoin presents an optimistic narrative, further fueling optimism about price increases.
While the prospects seem promising, there are several risks on the horizon. The possibility of catalysts being priced in, geopolitical conflicts, or unexpected selling pressure could slow down Bitcoin's growth. The failure of anticipated events, such as the Federal Reserve refraining from easing conditions, could trigger a significant market correction.
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