Citigroup Joins the Approval Process to Trade Bitcoin Futures

Written By: Isha Goel | August 26 2021

As Bitcoin prices remain on the rise toward $50,000, Citigroup is seeing a surge in client demand to invest in cryptocurrency products. While the bank has yet to gain the necessary regulatory approval, it would be joining Goldman Sachs in offering Bitcoin futures trading to its clients. 

Taking a Look at Indicators

Arcane Research conducted an analysis on traders’ fear and optimism and determined the index to be currently sitting in the ‘extreme greed’ territory this week. On the other hand, other indicators suggest a more neutral sentiment like the ‘relatively low funding rates in bitcoin’s futures market [that] indicates less exuberance among investors.’ Even QCP Capital noted that ‘Funding rates and future premiums in both BTC and ETH actually continue to be relatively low and muted,’ which means that ‘most of the rally has been driven by demand in physical spot rather than from leveraged speculators.’ This could possible indicate a local top and may suggest a good time for traders to sell a portion of their holdings. 

Credit for Image: Coindesk

Another indicator to consider is the spent output profit ratio (SOPR), or the price at the time the cryptocurrency was sold divided by the price at the time it was originally bought. After a steep decline since January, we are now seeing it turn positive. This could be a sign that the ‘capitulation period has ended and the market is back on solid ground.’ SOPR is a proxy for realized profit and loss for all coins moved on the blockchain so while investors were selling Bitcoin at a loss for most of June, holders are now sitting on profits relative to their cost basis. 

Credit for Image: Coindesk

What is the Impact?

Investors of course are becoming more interested as a result and this surge in demand is trickling down to megabanks like Citigroup. As the firm awaits approval to trades futures via the Chicago Mercantile Exchange (CME), it is actively recruiting people to join a crypto-focused team in London. In an interview, a Citigroup spokesperson revealed that ‘Given the many questions around regulatory frameworks, supervisory expectations, and other factors, we are being very thoughtful about our approach,’ and ‘We are presently considering products such as futures for some of our institutional clients, as these operate under strong regulatory frameworks.’ As the number of big banks venturing into crypto continues to increase, futures and exchange-traded products (ETPs) will likely be the next steps for these firms to allow clients to gain exposure to blockchain projects. 

Work Cited

Allison, Ian, and Tanzeel Akhtar. “Story from Business Citigroup Gearing Up to Trade CME Bitcoin Futures: Sources.” CoinDesk, CoinDesk, 24 Aug. 2021, www.coindesk.com/citigroup-is-gearing-up-to-trade-cme-bitcoin-futures-sources.

Dantes, Damanick, and Frances Yue. “Market Wrap: ‘Extreme Greed’ for Bitcoin Falters at $50K.” CoinDesk, CoinDesk, 24 Aug. 2021, www.coindesk.com/market-watch-extreme-greeed-results-in-bitcoin-price-slump.

Podder, Sohini. “Citi Considering Bitcoin Futures Trading for Some Institutional Clients.” Yahoo! News, Yahoo!, 24 Aug. 2021, news.yahoo.com/citi-considering-bitcoin-futures-trading-173134176.html.

Surane, Jennifer. “Citi Weighs Trading Bitcoin Futures as It Awaits Regulators’ Nod.” Bloomberg.com, Bloomberg, 24 Aug. 2021, www.bloomberg.com/news/articles/2021-08-24/citi-weighs-trading-bitcoin-futures-as-it-awaits-regulators-ok.

Wu, Ethan. “Citi Will Reportedly Start Trading Bitcoin Futures, Following Goldman Sachs’s Lead as Client Demand for Crypto Spikes.” Business Insider, Business Insider, 24 Aug. 2021, markets.businessinsider.com/news/currencies/citigroup-bank-crypto-bitcoin-futures-ethereum-goldman-sachs-cme-derivatives-2021-08.