Institutions Seem Strangely Absent During Recent Bitcoin Volatility

Exceptionally volatile at the best of times, Bitcoin and other crypto assets have made dramatic moves of their own this month. Interestingly, it looks like institutional investors largely stepped back from trading Bitcoin during the recent price moves.

A Wild Ride for Bitcoin Traders

Having spent much of 2020 rising, February saw Bitcoin top just short of $10,400. Since then, the trend has been largely downward. As BeInCrypto reported, the breakdown of an agreement between OPEC and Russia amidst the ever-worsening coronavirus pandemic triggered a selloff in oil, which had a knock-on effect on other markets. Bitcoin did not escape a pummeling of its own. On March 12-13, the cryptocurrency plunged by its largest ever short-term drop, breaking below $4,000 on some exchanges. The price has since bounced and at last check Bitcoin trades at around $6,650. Some analysts reason that recent stimulus packages from central banks around the world inspired the renewed buying pressure. However, as BeInCrypto reported previously, there is still a lot of money waiting in stablecoins on the sidelines. The sheer market capitalization of digital currencies like USDT and USDC at the moment highlights how unsure traders are of Bitcoin’s next move. Wherever Bitcoin’s price is heading next, one thing notable about the recent volatility is how absent futures traders were during the moves. As pointed out by TradeBlock’s head of research, John Todaro, volume for CME futures, by far the largest trading venue for Bitcoin derivatives, has been considerably lower in relation to spot exchange trading than it typically is.

Did institutions sit out this recent bout of #bitcoin volatility?

While bitcoin (XBT/USD) spot trading volumes for the month of march reached near term highs, CME futures volumes hit recent lows. pic.twitter.com/O9TPUFyST9

— John Todaro (@JohnTodaro1) March 27, 2020

Traders Love Volatility, Usually

Todaro observes that trading volumes on cryptocurrency exchanges (spot) were the highest they have been since the volatility that took Bitcoin to almost $14,000 last July. However, the volume of CME futures contracts traded is close to the lowest they have been over the same period. Todaro asks if institutional traders sat out Bitcoin’s recent extreme moves. Since the CME Group only allows accredited investors to trade its Bitcoin futures contracts, and most institutions wouldn’t be allowed to trade cryptocurrency in a largely unregulated industry, it seems a fair conclusion. Given the widespread volatility across global markets of late, it’s likely that those with the capital to trade CME Bitcoin futures have more pressing interests elsewhere right now. As BeInCrypto has reported previously, futures volume typically swells at times of heightened Bitcoin volatility.