How Have Bitcoin Futures Performed One Year On?

Markets and Costs

This time final yr, the market was abuzz with pleasure as CBOE’s XBT futures contracts and CME Group’s bitcoin derivatives merchandise launched for the primary time. There isn’t any doubt that BTC futures buying and selling has given some legitimacy to the asset class. Quick ahead one yr and there was gradual development because of the market downturn, however general demand for merchandise is rising.

Additionally Learn: Nasdaq Confirms Plans to Launch Bitcoin Futures in First Half of 2019

Excessive Margin Requirement Lowered Demand 

CBOE and CME are Chicago’s largest derivatives exchanges. The launch of bitcoin futures has performed a major function in driving institutional demand for crypto property. The margin requirement for BTC futures at CME is 35 p.c, whereas at CBOE it’s 40 p.c to account for bitcoin volatility. These merchandise give traders the flexibility to hedge and arbitrage. When the worth of an account drops under the upkeep stage, a margin name is triggered. The margin is sort of a down fee or a deposit {that a} market participant posts with the alternate clearing home.

How Have Bitcoin Futures Performed One Year On?
CME Bitcoin futures ticker: BTC yr down 76.2% for the yr

In response to one supply, an element which has slowed development of bitcoin futures has been the margin requirement, which has been extraordinarily excessive. In consequence, the contracts’ utility has been weakened as an environment friendly hedge because of the alternative value of capital.

How Have Bitcoin Futures Performed One Year On?
CBOE Bitcoin futures Ticker: XBT down 75.7% for the yr

CME Volumes Outpace CBOE Volumes

Cristian Gil, CEO of GSR, has highlighted the truth that lately CME volumes have considerably outpaced CBOE volumes, particularly from a notional standpoint, as a 1 BTC CME contract is price 5 instances CBOE’s XBT product. 

How Have Bitcoin Futures Performed One Year On?

“The overwhelming majority of buying and selling volumes has come from speculators, not market members seeking to hedge pure BTC threat, for instance miners or ICOs. Since these merchandise are financially settled, there was no must publish margin or work together immediately with BTC; subsequently, a lot of the buying and selling quantity has come from so-called “no-coiners” who’re quick promoting,” mentioned Gil. 

Bitcoin futures have additionally been broadly decried as bearish catalysts and the proof does appear incriminating, provides Gil.

Scandinavia Main With Product Launches

On the subject of extra established BTC merchandise accessible in the marketplace, the Swedish agency XBT Supplier was one of many first to launch an alternate commerce be aware (ETN) on Nasdaq Nordic in 2015.  This yr, the SEC additionally authorised investor entry to XBT Supplier’s Bitcoin ETN product which was previously solely accessible within the European market however then later suspended its trading on account of lack of knowledge. How Have Bitcoin Futures Performed One Year On?

Laurent Kssis, the CEO of XBT Supplier, a Coinshares firm, defined that after watching the primary yr of buying and selling for CME and CBOE bitcoin contracts, he’s most struck by the gradual decide up in quantity, however general very joyful that traders are getting increasingly more skilled instruments to entry this nascent market.

“As pitched, the primary utility of the contracts is as a easy hedge to bitcoin publicity. However in apply, this has typically come at a prohibitively excessive value,” mentioned Kssis.

Optimistically, he thinks the market is eager to see what Bakkt will deliver because it guarantees a extra environment friendly product with bodily supply, which ought to make manipulation at shut rather more problematic.

From my perspective, the extra fit-for-purpose merchandise accessible in the marketplace, the higher for traders, and that’s in the end who all of us on this trade serve,” completed Kssis. 

Have BTC futures exacerbated this yr’s bear market? Tell us within the feedback part under.


Pictures courtesy of Shutterstock and Bloomberg.


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