Breakthrough for Digital Assets in 2024
Institutional Adoption Drives Growth
The year 2024 has marked a significant breakthrough for digital assets, particularly for bitcoin (BTC), driven by increased institutional adoption. This shift has occurred through two key avenues: first, the integration of bitcoin into public balance sheets as a treasury asset, and second, the success of U.S. spot-listed exchange-traded funds (ETFs) that have amassed over 1 million BTC.
U.S. Listed Bitcoin ETFs Surpass Gold ETFs
A report from K33 Research reveals that U.S.-listed bitcoin ETFs have surpassed U.S.-listed Gold ETFs in terms of assets under management (AUM), including leveraged products such as futures-based ETFs. As of Dec. 17, Bitcoin ETFs reached assets under management (AUM) worth $129.25 billion, edging out Gold ETF AUM at $128.88 billion, according to Vetle Lunde, analyst at K33 Research.
However, Gold Remains Ahead in Spot-Based Products
However, when comparing spot-based products exclusively, Gold remains slightly ahead. According to Senior Bloomberg ETF Analyst Eric Balchunas, U.S. bitcoin spot ETFs hold $120 billion in AUM compared to $125 billion for Gold ETFs.
CME Activity Remains Strong
Futures Open Interest Approaches New Highs
The CME exchange, primarily used by institutions, continues to have strong activity, with futures open interest approaching new highs, with 212,635 BTC in open interest contracts.
Basis Trade Premium Continues to Rise
According to the report, the basis trade premium has continued to rise, reaching 16.4% — the highest level since November 2023. This indicates that CME traders anticipate increased momentum as the year comes to a close.
December Roll Expected to be Significant
The report notes, “January contracts are trading at sharp premiums relative to December contracts, with the contango widening to 1.5% on Monday — the highest next-month premium recorded since November 2023. The December contract on CME remains the most valuable, with open interest equivalent to 113,480 BTC. The upcoming December roll is expected to be significant, as several upcoming banking holidays may contribute to a further widening of the January premium.”
Net Inflows Continue for U.S. Spot-Listed Bitcoin ETFs
Farside Data Reveals Net Inflows Every Day Since November 27
The momentum has continued for the past month, as the U.S. spot-listed bitcoin ETFs have seen net inflows every day since Nov. 27, totaling $6.5 billion, according to Farside data. It is important to note that as the basis trade premium continues to widen and with a growing amount of open interest contracts on the CME, a large portion of these net inflows are part of the cash and carry trade.
Conclusion
In conclusion, the year 2024 has marked a significant breakthrough for digital assets, particularly for bitcoin, driven by increased institutional adoption. The success of U.S. spot-listed exchange-traded funds (ETFs) and the strong activity on the CME exchange indicate a growing appetite for digital assets among institutions. As the basis trade premium continues to rise and with a growing amount of open interest contracts on the CME, it is likely that this momentum will continue into the new year.
FAQs
Q: What is the significance of the basis trade premium?
A: The basis trade premium is a measure of the difference between the price of a futures contract and the price of the underlying asset. A rising basis trade premium indicates that traders anticipate increased momentum in the price of the asset.
Q: What is the contango effect?
A: The contango effect is a phenomenon where the price of a futures contract is higher than the price of the underlying asset. This can occur when traders anticipate increased demand for the asset in the future, causing the price of the futures contract to rise.
Q: What is the significance of the December roll?
A: The December roll is a period when the CME exchange switches from the December contract to the January contract. This can cause a significant increase in trading activity and a widening of the basis trade premium.
Q: What is the significance of the Farside data?
A: The Farside data reveals the net inflows into U.S. spot-listed bitcoin ETFs every day since November 27. This data indicates a growing appetite for digital assets among institutions and a significant increase in trading activity.
