Ecoinometrics - July 29, 2020

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Ecoinometrics

What a time to be alive! After such a long period in this tight trading range Bitcoin finally got a big breakout above $10,000. So far it’s a pretty solid move. And for sure, this is waking up the Bitcoin derivatives markets.


The Ecoinometrics newsletter decrypts Bitcoin’s place in the global financial system. If you want to get an edge in understanding the future of finance you only have to do two things:

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Here it is. Nice clean move straight through the resistance zone just above $10,000. This is still pretty fresh but hopefully we can transition to have $10,500 flipping to a support level. And then to the moon!

Okay, maybe not directly to the moon. We need to retake the high of 2017 first. But this is a good start.

After each halving Bitcoin has experienced a period of exponential growth. The first halving was followed by a very fast growth while the second halving was a bit slower.

At the moment, following the third halving, we are on track for something in between. If I take more or less an average of the growth in the previous two halving we’ll be above $30,000 by the end of the year.

Not too bad.

Of course nothing is certain so if you are trading this market you better plan level to level.

But if you have a long term investment horizon the trend is your friend. Just continue stacking sats and enjoy being in the green.

Now of course this breakout is having a massive impact on the Bitcoin derivatives. 

Especially on the US regulated markets, the past couple of months of very low volatility had put everyone to sleep.

The traded volume was declining. The number of open positions was stuck on a plateau. But that’s in the past now!

I mean just checkout what happened to Bakkt on Monday. The volume completely jumped off the chart. There was also a massive surge in open positions. 

If Bakkt needed some trigger to start growing then that should do the trick.

Even more interesting is the dynamic on the CME Bitcoin futures and options market. This breakout occurred less than a week before the July contract is due to expire…

Naturally that’s bringing the trading activity back to life. On the futures:

  • Record high open interests, about 65k BTC worth of positions.

  • Big volume for two days in a row breaking the downtrend in activity.

As you can see on the heat map very few contracts had been rolled over from July to August before the move. At the close on Tuesday we still have 4,700 open contracts on July. 

Well it turns out that rolling over when volatility is on the rise is pricey. Look at the evolution of the spread between the back month and the front month. 

On a settled price basis the August contract trades at a $180 premium to July. This is way above the last couple of months. But hey, that’s the price you have to pay to be on the trend.

The CME Bitcoin options are also saved from boredom. Do you remember all those bull call spreads that popped up a long time ago.

Basically each previous BTC attempt to go over $10,000 resulted in new bull call spreads appearing out of nowhere.

Their patience might finally get rewarded.

Or not. 

The lowest leg of the large positions is at the $11,000 strike. And after the break out, Bitcoin is settling at… $11,000. 

I don’t think there is any conspiracy here. But for those bull call spreads to start generating profits Bitcoin needs to settle substantially above $11,000.

C’mon, we can do it! Those poor guys had like 25,000 BTC worth of calls expiring worthless last month. At this point they deserve it.

Jokes aside, this price action is reviving appetite for more bullish positions. Yesterday added 2,000 BTC worth of bull call spreads on the August contract. The lower leg is set at $12.5k. 

As you know there is a one week delay in the Commitment of Traders report. That means this week’s report shows data for July 21. 

The next report will be very very interesting since it will include the breakout. But still let’s take a quick look at the situation as of last week:

  • The smart money remains flat net short. If you ask me, that’s not a very comfortable position to be in today...

  • Retail was already smelling the winds of change. They turned more net long.

Check it out.

Honestly if in the next report we see the institutional investors still very much net short then I might have to rename them from smart money to dumb money.

Let’s see how that plays out.


The Ecoinometrics newsletter decrypts Bitcoin’s place in the global financial system. If you want to get an edge in understanding the future of finance you only have to do two things:

  1. Click on the subscribe button right below.

  2. Follow Ecoinometrics on Twitter at https://twitter.com/ecoinometrics

Done? That’s great! Thank you and enjoy.