The Intercontinental Exchange (ICE) backed cryptocurrency trading platform Bakkt had launched with a promise to push for bitcoin adoption by appealing to institutional investors and ultimately upsurge crypto spending to high levels.
The Bakkt BTC futures contracts that started off slow had soon picked up the pace with 1741 BTC ($15.5 million) worth of contracts traded in one day in November. This followed another record in December as the ICE-backed crypto exchange managed to trade close to $50 mln worth of its physically-settled Bitcoin futures on Dec. 18.
Hero to Zero
Bakkt stepped into Bitcoin options based on Monthly Bitcoin Futures contract on December 9 but hasn’t been able to draw much volume so far. According to data from the ICE website, Bakkt has seen zero trading volumes for Bitcoin Options over the last week. The last traded day for Bitcoin Options was January 17.
Despite this, an ICE spokesperson told media outlet The Block, that Bakkt continues to see “strong” interest in both its bitcoin options and futures products. The spokesperson said:
“We continue to see strong interest in our growing base of customers in our bitcoin futures and options complex, which offers a broad range of choices for interacting with and hedging positions in digital assets.”
Investors prefer CME
Bakkt’s rival, The Chicago Mercantile Exchange, or CME which has been another major player that started off since 2017, launched options on Bitcoin (BTC) futures on January 13. The platform smashed Bakkt’s day one trading volume at $2.19 million versus the latter’s $1.15 million.
CME doubled its options trading volume within the first week from launch. This goes to show how institutional investors prefer CME over Bakkt. According to data from Skew, the recent spike in interest seems to be catalysed by CME’s decision to open up Options trading based on demand.
The decision by CME to heavily invest in the Bitcoin space with its futures trading seems to be paying off as Tim McCourt, CME Group Managing Director and Global Head of Equity Index Alternative Investment Products, told media outlet Cointelegraph that the platform’s Bitcoin futures product “have surpassed $100 billion in total notional value traded since their launch in December 2017.”
CME’s growth in the institutional segment was also showcased in the latest Arcane Research report that noted that “it seems that the institutional investors are preferring CME for now.”
CME has been registering the average daily volume of 6,400 contracts per day in the year 2019. Bakkt had such volume only during one day – on 18 December 2019. The difference is substantially more pronounced given that Bakkt’s contracts are for one bitcoin each while the CME futures’ contract size is five bitcoin. Speaking on CME’s success, McCourt said:
“We continue to see strong participation from institutional investors, physical bitcoin traders and other clients who value the transparency, price discovery and risk transfer that only a regulated marketplace like CME Group can offer.”
For now, institutional investors are rooting for CME, which isn’t surprising as the CME’s two-year-old bitcoin futures are among the most liquid derivative products in the cryptocurrency space. It is yet to be seen whether Bakkt is able to turn the tables.
Even though the majority of investors in futures trading are still coming from traditional cryptocurrency exchanges, such as Huobi, BitMex, OKEx and Binance, regulated platforms like CME and Bakkt continue to act as a bridge for institutional investors to step into the cryptocurrency market without facing the risks.