Bitcoin CME Report for 10 Jan to 17 Jan and Analysis

21 Jan 2023

CME Overview:
Bitcoin and crypto, in general, have had a major run starting most significantly since the start of the new year. BTC1! Is the Bitcoin Chicago Merchantile Exchange Futures trading and comprises institutional trading of Bitcoin.
The report that comes out on Fridays shows the actions that occurred by position from the previous Tuesday to the Tuesday before that. Basically, showing a week-long snapshot of institutional positions on Bitcoin and in this idea post from Tuesday 10 Jan to Tuesday 17 Jan which is back-dated by 3 days.

Bitcoin CME Report for Tuesday 10 Jan 2023 to Tuesday 17 Jan 2023:
From the 10th to the 13th of January price increased from 17.1k to 19.9k before a 2-day break for the weekend. Most notably from Monday the 16th and Tuesday the 17th the CME gapped up, meaning that the close price from Friday (CME closes for weekend trading) the price of Bitcoin increased from 19.9k and opened on Monday at 20.9k. This creates a “Gap”, and by rule, gaps do not have to be filled how ever probability says they have a higher fill rate than not fill rate. That gap has now been reduced from 20.4k to 19.9k but largely still exists.

In this period we see that Dealers and Intermediaries (The Exchanges / Brokerages) reduced their longs by 100 positions while still maintaining 3600 short positions. This is very different from what usually occurs in relation to lower timeframe price action as we see Dealers and Intermediaries usually adjusting their positions more regularly to catch the Major Moves

Asset Managers still largely out of Position:

The other interesting figure from a more accurate perspective is how out of position the Asset Managers have been in the last year plus as they began heavily building longs at the highs in the fall of 2021 and now they have begun to heavily increase their positions in this weeklong period by a further 800 positions. This means that compared to short positions Asset Managers and Institutions are 95.8% Long.

Dealers and Intermediaries are still Short:

To bring this into perspective Dealers and Intermediaries are still 94.69% Short having heavily shorted in the fall of 2021 and then built and continuously added major shorts from April and from the Summer of 2022, continuously increasing their positions until now.

Summary:
This most recent COT report is interesting as it shows Asset Managers and Institutionals building longs at the same time as we have good market movement to the upside. This means that we are potentially seeing Asset Managers and Institutionals breaking their losing streak of being out of position consistently in the past 18 months or so.
The major move-up in Crypto has been driven by extreme bearish sentiment and heavy shorting in the market as every continuous move-up is met by heavy shorting from retail actors thus providing more liquidity to move price upwards.

The gap is down at 19.9k and is still in place and breaking any significant structure above still gives the opportunity for the market to capitalize on taking out later longs that got into position over 20k. The upside move is still in play until support is broken, a new gap that could be formed come the Monday open on Jan 23rd would potentially provide an incentive for market movement as we open the week. Our recommendation is simple, the upside should continue until we have a significant break of structure. Late Longs have not been significantly punished as heavier liquidity is building below us.