Here’s Why Bakkt’s Latest and CME’s cash-settled Bitcoin Futures are Huge for the Market
- “If gold is any precedent, then brace for growth” – CoinShares
- The cash-settled gold futures market is now 30x the physical gold market
- Futures and options are popular with traders of all types
- Bitcoin futures trading volumes top $1 billion daily
- CME launching Bitcoin futures caused the crash in Bitcoin price in 2017, stated many.
Last year, research by San Francisco Federal Reserve also reported that Bitcoin’s drop from its $20,000 peak was directly tied to the launch of the futures market, that “does not appear to be a coincidence.”
Given the fact that the launch of Bitcoin futures trading by CME gave the traders an opportunity to short BTC, it is possible that the launch of derivatives product was behind the fall or maybe not as Bitcoin saw larger rallies before that (318,864% return in 2011 and 58,474% in 2014) that eventually crashed as well.
However, CME bitcoin futures market might grow exponentially, even more than the physical BTC market.
30x the Growth
The most important thing about Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME) is that they are settled in dollars and no bitcoin actually changes hands.
Market commentators aren’t fond of this feature of CME BTC futures and have been more bullish of the physically delivered bitcoin futures introduced by Intercontinental Exchange’s Bakkt.
But recently, Bakkt also announced the launch of cash-settled Bitcoin futures in Singapore next month to offer investors in Asia and around the world “a convenient, capital efficient way to gain or hedge exposure in bitcoin markets.”
The market may not be in favor of cash-settled Bitcoin futures but it could be beneficial for the market.
Talking about the impact of CME Group on the Bitcoin market, CoinShares, a digital asset management firm stated,
“If gold is any precedent, then brace for growth — the cash-settled futures market is now 30x the physical gold market.”
In its 2019 Crypto Trends Report, the company shared how the gold market grew “exponentially” once its cash-settled (paper) futures were introduced in the market. Since its launch, the futures market has grown to be 30x the physical gold market.
Both Futures & Options grew “materially” over the last 20 years
Futures and options are popular with traders of all types, be it in the equity indices market, commodities, currencies, interest rates, or any other markets. As such it has grown “materially” over the last 20 years.
As such, it’s no surprise CME is launching options on its Bitcoin futures in January and Bakkt will be introducing them in early December.
CME Bitcoin futures market has been a popular trade for institutions and other speculative traders.
If we take a look at the regulated Bitcoin futures market, since first introducing cash-settled bitcoin futures contract in 2017, it has been seeing constant growth.
The report also points out how the trading volume of Bitcoin futures surpasses $1 billion daily. Actually, “$3.3B of trading volume per day across the top 13 major exchanges.”
Look who's here 👀 pic.twitter.com/oPhcDffm4F
— skew (@skewdotcom) November 27, 2019
CME, however, is still quite a few steps below other popular BTC futures platforms like BitMEX, Huobi, OKEx, CoinFLEX, and Deribit.