Institutions Seem Strangely Absent During Recent Bitcoin Volatility

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In Brief
  • With big swings in both directions, Bitcoin has been particularly volatile lately.

  • CME Bitcoin futures volume has dropped in recent weeks.

  • The data suggests institutional traders are not interested in the market at the moment.

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Just about every market on the planet has taken a beating as the coronavirus continues to cause unprecedented disruptions to the global economy. As traders struggle to seek out the most profitable harbor for their money amidst the carnage, volatility abounds.

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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.

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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.

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.

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A former professional gambler, Rick first found Bitcoin in 2013 whilst researching alternative payment methods to use at online casinos. After transitioning to writing full-time in 2016, he put a growing passion for Bitcoin to work for him. He has since written for a number of digital asset publications.

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