After all the fanfare, fevered anticipation, and breathless media coverage, Bakkt’s launch of bitcoin futures on Monday was a damp squib. Despite the rollout of physically delivered BTC futures going without a hitch, volumes were low, while the less said about bitcoin’s price in the aftermath, the better. Despite this inauspicious start, however, there is cause for confidence in the future of bitcoin futures.
Never Mind the Bakkt Lapse
Whether it was priced in to begin with, or never even factored into the reckoning of traders, few would dispute that Bakkt’s launch of bitcoin futures was anticlimactic. In the event, only 71 BTC was placed into contracts on Bakkt’s opening day, but as sanguine heads pointed out, Bakkt should be judged in a year – not a day. By that time, Intercontinental Exchange’s Bakkt platform will have been complemented by CME’s introduction of bitcoin options, which are scheduled to arrive in early 2020. The derivatives marketplace announced last week that it would be adding “additional tools for precision hedging and trading” of BTC. All going to plan, BCH futures will also be debuting on a CFTC-regulated exchange around the same time.
Igor Volfson is the CMO of forthcoming cryptocurrency exchange Mainfinex, and a former professional margin trader. He told news.Bitcoin.com: “Despite Bakkt having had a quiet launch, CME has been going strong, with thousands of futures contracts traded per day. I think that demand for crypto derivatives will continue to come from retail investors in the short-term, but I expect institutional investors to eventually drive the bulk of the trading volume.” He added: “I think the cryptocurrency landscape will look very different by 2020, with the launch of new derivatives platforms, including Mainfinex, giving traders more options than ever, which will have a knock-on effect in terms of increasing demand for bitcoin and other assets.”
John Jansen is the CEO of crypto derivatives exchange Deribit. He told news.Bitcoin.com: “With Bakkt’s physically delivered futures now live, and CME’s bitcoin options on their way, it’s essentially a waiting game for demand to pick up. Some retail investors have been laboring under the misconception that institutional adoption will jumpstart the crypto market, but the reality is far more nuanced. At Deribit, institutional interest has been growing steadily all year, with strong demand for bitcoin options that run all the way through till March 2020. We welcome the competition from traditional exchanges such as CME, which can only benefit bitcoin and the crypto space as a whole.”
Liquidity and Liquidations
To see how much sway derivatives hold over the entire crypto market, one need only look at last night’s frenzied activity as BTC plummeted, liquidating hundreds of traders who were margin called. More than $700M was liquidated on Bitmex alone in the last 24 hours, while Deribit saw over $1 billion of volume, 85% of which was for BTC and the remainder on ETH. On Binance, futures volumes exceeded those for spot, amounting to $800M and $700M respectively. Despite the day creating more losers than winners, as traders who were long misjudged the mood and paid dearly, the volatility of September 24 showed that derivatives markets now guide the cryptosphere. Where futures lead, spot follows.
One matter that can be put to bed is the notion that through products such as Bakkt, institutional investors are just starting to gain exposure to bitcoin derivatives. The smart ones were here already, plying their trade in the trenches and trollboxes along with everyone else on Deribit and Bitmex. Bakkt might bring legitimacy and liquidity to the market, but it won’t bring institutional interest. It was here all along.
Do you think derivatives markets now dominate bitcoin’s price movements? Let us know in the comments section below.
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