The “smart money index”, which measures the net bullish bets by institutional players through Chicago Mercantile Exchange (CME) Bitcoin futures, has reached an all-time high of over 13,700 in recent days.
Large investors have taken large long positions in the Bitcoin (BTC) futures market, indicating that institutional capital is flooding into the coin in anticipation of the SEC potentially approving a spot Bitcoin exchange-traded fund (ETF). Meanwhile, Bitcoin is trading today at around $43,000.
According to data from MacroMicro, a leading derivatives analytics firm in Taiwan, the “smart money index”, which measures the net bullish bets by institutional players through Chicago Mercantile Exchange (CME) Bitcoin futures, has reached an all-time high of over 13,700 in recent days. This index reflects the positioning of sophisticated market participants such as hedge funds and asset managers, who are considered to possess superior insights into market movements.
Because of their regulated structure, CME’s cash-settled Bitcoin futures contracts, which are sized at 5 BTC each, are viewed as a representation of professional and whale activity. These contracts enable investors to gain exposure to the price fluctuations of Bitcoin without directly owning the asset, making them appealing to institutional investors with strict requirements. The increase in bullish bets through these derivatives indicates that fund managers and traditional investors are growing more confident about the potential for the asset’s further upside.
The significant rise in the smart money index during the past quarter, coupled with growing optimism surrounding a Bitcoin ETF, indicates that these large players anticipate substantial inflows and rising values following regulatory approval.
Institutions Eye SEC’s January 10 Deadline
Reports indicate that the SEC may be eyeing its deadline of January 10th to approve one or more spot ETFs, that will allow big players to directly invest in BTC itself, rather than futures contracts tied to its price. Several applications from industry giants such as Fidelity and Grayscale are awaiting regulatory approval. If given the green light, these new investment vehicles could unlock billions of dollars in fresh capital into the coin
The increasing prospects of an SEC-approved fund have propelled Bitcoin’s over 80% price surge over the past three months. However, some caution that the announcement itself may fall short of lofty expectations, resulting in a “sell-the-news” reaction in the market.
In addition to the ETF narrative, observers also attribute the surge in institutional activity to growing confidence in a potential rate cut by the Federal Reserve in 2024. Lower interest rates typically benefit non-yielding assets like Bitcoin and gold. The significant influx of sophisticated capital suggests that managers now view cryptocurrencies not merely as speculative instruments, but also as legitimate hedges against market volatility amidst a challenging macroeconomic environment.
Of course, despite the smart money index reaching unprecedented levels, risks still exist within this young and highly volatile asset class. Bitcoin has experienced multiple wild peak-to-trough selloffs during previous bull markets, which can create significant challenges for those who will enter the market late out of the Fear of Missing Out (FOMO).
Nevertheless, the remarkable pace of institutional adoption signifies that fund managers and traditional investors can no longer ignore the potential of BTC or deny the growing role of digital currencies in diversified investment portfolios. Whether the SEC approves a spot Bitcoin ETF in January or not, it seems that the smart money believes broader integration of cryptocurrencies is inevitable.
