Massive Buyers on CME Might Be Front-Running Bitcoin ETF Approval, Analysts Suggest

Dylan LeClair, co-founder of cryptocurrency consulting firm 21st Paradigm, has suggested that CME Group’s futures traders might be front-running an incoming approval of a Bitcoin exchange-traded fund in the U.S.

CME futures basis widening meaningfully.

Good chance that players in the know are front running a $BTC futures ETF announcement. https://t.co/Jnf3SfkgsH

— ?Dylan LeClair? (@DylanLeClair_) October 6, 2021

CME futures basis, which shows the difference between the spot price and the futures price, has witnessed a significant spike over the past day.

The fact that contango is higher on CME than on Panama-headquartered Deribit shows that strong buying pressure is mainly coming from the U.S.  

His take was also echoed by BlockTower’s Mike Bucella, who also said that the ga could be caused by short positions getting margin-called during Bitcoin’s recent ascent to the $55,000 level.    

CME Futures basis in BTC blew out over last 24 hours,

My guess,
1) Folks are front-running a futures-based BTC ETF
2) Short are getting margin-called,
And, likely both.

Allowing BTC to break from other risk-assets, driving the inflation/gold narrative at just the right moment.

— Mike Bucella (@MikeBucella) October 6, 2021

U.S. Securities and Exchange Chair Gary Gensler has repeatedly voiced his support for a Bitcoin ETF backed by CME futures that will be regulated under the Investment Company Act of 1940 over the past few months.

Bloomberg’s senior ETF strategist Eric Balchunas believes that there is a 75% chance of a futures-based Bitcoin ETF being approved in October.

Yes, the SEC has kicked can on bitcoin ETF approval BUT that is for the physically-backed ones under '33 Act. The futures ETFs filed under the '40 Act (which Genz loves) are very much alive and likely on schedule (we think 75% chance approved in Oct). Here's our odds: https://t.co/cSZ8aDsITl pic.twitter.com/DUEvRANvO7

— Eric Balchunas (@EricBalchunas) October 2, 2021

In a recent Forbes interview, former SEC Chair Jay Clayton, who failed to approve a Bitcoin ETF during his term, said that market interiority and surveillance were the two key prerequisites to approving a Bitcoin ETF:

I think the SEC has been very clear about market integrity. Gensler has been very clear about market integrity and surveillance being a key threshold to the approval of ETFs in the space. I think that’s appropriate.