The outcome of the U.S. presidential election has brought significant gains for Wall Street banks, which had placed bets on Bitcoin’s price surge in the weeks leading up to the election. According to estimates from Forbes, these big banks have accumulated a total of $1.4 billion in paper profits as a result of their investments in Bitcoin futures contracts.
Bitcoin Futures Contracts: A Lucrative Investment Opportunity
To understand how Wall Street banks were able to capitalize on the rising price of Bitcoin, it’s essential to grasp the concept of Bitcoin futures contracts. These financial derivatives products allow traders to speculate on the cryptocurrency’s future price without actually owning it. While most U.S.-based banks are prohibited from directly holding Bitcoin, they can still gain exposure to its price fluctuations through various means, such as derivatives and exchange-traded funds (ETFs).
A Surge in Open Interest: A Clear Indication of Market Sentiment
The analysis conducted by Forbes is based on data released by the United States Commodity Futures Exchange Commission (CFTC) on November 5. The data shows that between October 8 and 15, banks’ open interest jumped significantly, from 1,200 BTC futures contracts worth $373 million to 11,766 contracts valued at $3.8 billion. This substantial increase in open interest is a clear indication of the market’s growing sentiment towards Bitcoin.
Banks’ Holdings: A Glimpse into Their Investments
Long positions held by banks through their brokerage units totaled $3 billion on the Chicago Mercantile Exchange (CME), with an average purchase price of $65,800. As a result of Bitcoin’s 22% price surge since November 6, Forbes estimates that these paper gains would amount to approximately $1.4 billion.
A Brief Look at the Numbers
- $3.5 billion: The increase in open interest between October 8 and 15.
- 11,766 contracts: The number of BTC futures contracts held by banks on November 15.
- $373 million: The value of the initial 1,200 BTC futures contracts (October 8).
- $3.8 billion: The value of the 11,766 BTC futures contracts (November 15).
Bitcoin’s Price Performance: A Recent Surge
Bitcoin’s recent price surge has been largely attributed to Donald Trump’s reelection on November 6. This event has led many in the crypto market to believe that federal agencies will take a more cooperative approach under the new administration.
Publicly Traded Crypto Companies Reap Benefits
The anticipation of a more favorable regulatory environment has also had a positive impact on publicly traded crypto companies. On November 11, Coinbase’s stock (COIN) jumped over 20% to reach the $300 mark for the first time since 2021.
Market Capitalization: A New Record
As reported by CoinGecko, cryptocurrencies’ market capitalization has reached an all-time high of $3.17 trillion on November 13, representing a 119% increase from last November.
Conclusion
The outcome of the U.S. presidential election has brought significant gains for Wall Street banks, which had placed bets on Bitcoin’s price surge in the weeks leading up to the election. These big banks have accumulated a total of $1.4 billion in paper profits as a result of their investments in Bitcoin futures contracts. The anticipation of a more favorable regulatory environment under the new administration has also led to significant gains for publicly traded crypto companies and a new record for market capitalization.
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