Institutional Investors Still Slow On The Uptake But Unregulated Crypto Exchanges Rule the Market
Institutional Investors are still slow on the uptake despite bitcoin being over a decade old. In 2019, institutional investors remained sidelined despite the improvement of the institutionally-focused products and services like derivatives and custody, states crypto exchange Kraken in its latest report.
🐙 2019 TREND: THE RISE OF #CRYPTO DERIVATIVES 📈
Derivatives have traditionally been an institutional product…
… but offshore venues still dominate in crypto.
— Kraken Exchange (@krakenfx) February 19, 2020
Last year saw an impressive 84% year-over-year growth in regulated crypto derivative notional volume but much of the industry’s appetite gravitated towards unregulated venues that offer higher leverage and diverse product offerings.
Regulated Exchanges Grew in 2019
Notional volume from regulated derivatives fell to 5% in 4Q 2019, one year low and a significant decline from the 2019-high of 10% in 2Q 2019.
While CBOE announced it would cease bitcoin futures trading, just two months later, CME reported a record volume of $11 billion in May 2019. At the end of Q3, ICE launched Bakkt for industry-first physically-settled bitcoin futures contracts that later included bitcoin options and cash-settled futures.
Quarterly notional volumes of regulated exchanges
In January this year, CME also announced bitcoin options, while rumors are that NASDAQ is also planning to release bitcoin futures this year.
But Unregulated Exchanges Still Dominate the Market
However, the unregulated exchange are still dominating the market, much of which is attributable to platforms like Binance Futures and FTX.
Quarterly notional volumes of regulated vs. unregulated exchanges
Crypto derivatives exchange FTX is reportedly seeking to raise $15 million in an equity round that puts the company at a $1 billion valuation.
Hong Kong-based FTX’s CEO Sam Bankman-Fried confirmed the news to the news outlet The Block. The exchange is apparently planning “significant” growth that is not limited to just hiring more staff members but also expanding its product line.
Meanwhile, FTX token recently reached its all-time high at $2.92, up 4.36% in the past 24 hours and over 18% in the past month.
The exchange also offers presidential betting on crypto might be driving this uptrend. The new product was offered in early January that allows users to bet on the upcoming US presidential election. Currently, it lists six candidates, Donald Trump, Bernie Sanders, Michael Bloomberg, Joe Biden, Elizabeth Warren, and Pete Buttigieg.
Popular crypto options exchange Deribit has also reportedly completed its 10% sale of equity. The Panama-based exchange has been looking for buyers of its shares since January at a 9-figure valuation.
The exchange accounts for over 80% of open interest and is now looking to grow its product offering and draw more interest from both retail and institutional traders.