It is hard to get away from the impact made by institutional interest in the cryptocurrency space, but more than that, it appears as if Bitcoin investing is finding a vehicle that is attractive to all kinds of investors – derivative trading.
Since CME and CBOE entered the Bitcoin futures market in December of 2017, the demand for more in this form of investing has been growing. Institutional investors enjoy it because they have a traditional vehicle to make money off the exciting and volatile Bitcoin market, and they have continued to flock in.
The majority of investors in futures trading are still coming from traditional cryptocurrency exchanges, such as Huobi, BitMex, OKEx and Binance, but the introduction of Bakkt and its physically settled innovative contracts, as well as CME’s recent Bitcoin futures options, are pointing towards 2020 being a year for derivative Bitcoin investment.
Bitcoin Futures volume crosses $25 billion
Looking at a selection of exchanges that offer Bitcoin futures – both institutional and cryptocurrency-based, derivative trader Skew has shown the recent spike in interest that seems to be catalysed by CME’s decision to open up Options trading based on demand.
Indeed, the decision by CME to heavily invest in the Bitcoin space with its futures trading seems to be paying off as data from CME Group shows that as of Thursday open interest for its futures products alone totalled 5,328 contracts — or 26,640 BTC ($237 million).
But while CME may be the big name leading the way, the effects on institutional investment adoption cannot be overlooked as Bakkt, while still small in volume, is offering a new type of contract that settles in Bitcoin, as FX also opened up their options trading recently too.
Setting up for a big year?
Bitcoin is already setting up a good start to the year with the coin crossing the $9,000 mark this week and showing a bullish tendency to keep growing. Some feel that this is down to the Bitcoin mining rewards halving, but it is hard to ignore the effect of the increase in derivatives trading and the new doors that are being opened by companies like CME.
The last few years for Bitcoin have all been quite different – 2017 was about massive growth, 2018 was a bear market but a boom for blockchain, and 2019 was a year of settling down and renewed interest. Perhaps, 2020 will turn into a year of strong institutional adoption and investment as these tools continue to mature and grow.