The Crypto Futures market is growing significantly. Back in December 2017, spot trading was the basic option available for digital currency traders. There has been a big change in trend after the launch of the Chicago Board Options Exchange’s (CBOE ) Bitcoin-based futures contracts.
Back in 2019, we witnessed significant derivatives actions from companies such as CME Group and Bakkt. Come 2020 the demand for CME’s Bitcoin futures is still growing strong and the firm’s options products might be available this week. In addition, Bakkt’s physically-delivered BTC futures are experiencing consistent daily growth in volumes.
According to a new report by Bitcoin.com, the trading volumes in Bitcoin futures’ markets have spiked significantly since the beginning of the year and may continue to rise as 2020 progresses.
What is the reason for the upward trend? First, there have been speculations that a significant percentage of the recent spike in trading volumes on Chicago Mercantile Exchange (CME) could be due to the introduction of Options on its Bitcoin futures contracts, scheduled for today. The CME Group has been providing fiat-settled bitcoin futures contracts for upwards of two years now. It is believed that mainstream and institutional investors became aware of digital currencies markets back in 2017.
The rise in Futures’ Open Interest
Moreover, a note on Bloomberg on January 11 from JP Morgan Chase analysts led by Nikolaos Panigirtzoglou, indicates that “there has been a step increase in the activity of the underlying CME futures contract” over the past couple of days. In addition, Panigirtzoglou adds that their open interest has risen by 69% since the end of December 2019; plus the demand by large open-interest holders has increased in number
“This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”
On the same token, as per Econometrics’ CME Futures Activity Report on Jan. 9, strong traded volumes and open interest are settling above average in comparison to the last few months.
Bakkt Trading Volume on Upward Trend
Indeed, Bakkt’s all-time high for the number of future contracts traded within a 24 hour period was on December 18, 2019. Specifically, 6,601 future contracts worth $47.3 million were traded. However, on January 7, 4,823 contracts worth $40.75 million were traded almost beating the previous record.
In addition, the average trading volume on the platform during the second week of January 2020; is consistently higher than the whole month of December 2019.
Binance Futures Also Dominate Trading Volumes
The Malta-based cryptocurrency exchange firm has been a major player in the futures market. Prior to the futures launch, 99% of Binance’s business came from spot trading. However, after the introduction of the futures there is a significant change in this paradigm.
After the introduction of 125x leverage on BTC/USDT, Binance Futures increased to 70% of the total volume traded. This indicated the first time Bitcoin Futures trading volume overtook that of Bitcoin’s spot in less than a month of its introduction. Since then, futures have exerted dominance in trade volume. According to the latest Binance research:
“Since mid-November, Binance Futures continued to dominate 75% of volumes on Binance its position as investors’ appetite for derivatives trading grows.”
Furthermore, back in December, the Binance Futures platform introduced BCH futures with 75x leverage. And since day one, spot trading declined significantly. According to the exchange’s most recent report, BCH spot markets registered just $10.1 million worth of volume traded on the same day.