Bitcoin futures have been growing in popularity ever since the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) opened up this derivative trading option to institutional investors at the end of 2017. Now, early on in 2020, the growth is noticeable as $20 billion-plus was traded across several cryptocurrency and traditional exchanges yesterday.
Information from Skew (@skewdotcom) showed how aggregated daily trading volume for Bitcoin futures across 12 popular exchanges had been on the rise this past week — culminating in a more than $20 billion spike yesterday.
Most of the action came from cryptocurrency exchanges OKEx, Huobi, and BitMEX — with Binance also showing up quite prominently after a few days of launching altcoin futures trading options.
With regards to the institutional options, such as CME and the physically-settled Bakkt, their presence is still rather small.
Serious bitcoin futures volumes yesterday – $20bln+ on our radar (not an exhaustive count) pic.twitter.com/6kCSFRq6cy
— skew (@skewdotcom) January 9, 2020
A Year for Derivative Trading?
While only a few days into 2020, the upward trend on daily volume for futures trading seems to indicate that this could be a big year for derivative trading. Through 2019, there were suggestions, especially from the institutional offerings, that interest was steeply on the rise.
In November 2019, Bakkt, touted to be an all-important bridging tool between institutional investors and Bitcoin, showed impressive growth after a slow start. It went on to crack an all-time high of $42.5 million in Bitcoin futures for one day late last year.
More so, CME, the world’s largest futures exchange, is set to launch Bitcoin options on its futures contracts as early as next week in response to heightened interest from their investors. This follows CME announcing that it had filed to double the monthly Bitcoin futures open positions limit to 10,000 BTC in September last year, due to this increased demand.
As mentioned above, it is not only Bitcoin futures that are garnering interest. Binance has been opening futures trading — with 75x leveraging — for many of the top 20 altcoins. Exchanges like StormGain also allow for high-multiplier trading on cryptocurrencies like Bitcoin, Litecoin, Ethereum, and XRP.
What Can Futures Trading Do for Bitcoin?
Many will read these aggregated daily volumes with satisfaction as it could indicate a maturing Bitcoin market.
Firstly, there is the institutional injection which is growing. Also, the fact that investing in such a new and volatile asset with a traditional product is on the rise could indicate stronger interest in the cryptocurrency market.
That being said, there is also a counterpoint. Some feel that derivative trading like this allows for strong speculative trading — which can be damaging to the overall Bitcoin market. Traders are offered the opportunity to essentially bet on Bitcoin’s movement without much need for an understanding of the technology or the ecosystem in general.