It’s been an exciting week for Bitcoin with volume averaging about 600 contracts per day on the CME and I would expect over the next few weeks’ volume and open interest to significantly pick up. There’s two main catalysts for this with the first one being margin requirements. Most firms are still maintaining margin requirements well above exchange minimums keeping participants out. I would expect margins to slowly decline to exchange minimums over time as the contract stabilizes. Secondly, hedge fund participation should drastically increase in the coming weeks. Until recently hedge funds paid little attention to the cryptocurrency but now the rollout of the five bitcoin contract and volatile price action should attract more participants. Hedge funds have been searching for products other than stocks and bonds because of the low volatility in bonds and the high valuations in stocks.

Below is a daily chart of the January bitcoin futures chart (data is limited due to the contract being launch just a few days back)


Phillip Streible

Early in his career Phillip began trading his own account as a screen trader focusing on the metals, grains and stock indices. He then became a Series 7 licensed financial consultant with A.G. Edwards. Later, he expanded his trading experience into a Series 3 licensed commodity broker with Investment Analysis Group. Most recently he was a senior market strategist at MF Global before joining RJO Futures in October 2011 as a senior commodities broker. As a senior commodities broker his goal is to show clients how to anticipate, recognize and react to bull and bear market conditions through the use of technical analysis techniques that help them to define risk.