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The future of crypto derivatives
Jacob Pouncey
Cryptocurrency analyst, Saxo Bank
Summary: This week the entire crypto market cap fell by 3.5%, bringing the market cap to $250 billion. Bitcoin is up by less than 0.2%. Meanwhile, Ethereum rose by 13%. Bitcoin’s and Ethereum’s month-to-date returns are 48% and 58% respectively
Bitcoin’s steam appears to be running out as volumes are declining while the price is consolidating around $8,000.
CME reaches highest notional volume ever
On 13 May the CME Group reported over a billion US dollars in record volume for their Bitcoin Futures products. This volume dwarfs that previous record by 50%. This brings the volume traded for at over $6.6bn for May. We see a similar trend for other derivative providers, such as Crypto Facilities and Deribit showing record months in May. This trend highlights that institutions are increasingly using derivatives to both hedge and gain exposure to the nascent technology.
SEC delays Bitcoin ETF again
This week the SEC decided to delay the decision on the VanEck Bitcoin ETF, a day earlier than expected. Despite this surprise the BTC price barely moved on the news, possibly signalling the lack of speculation around an ETF approval. The new deadline for a decision is 22 August. The market has been unfazed by ETF decisions ever since the rejection of the Winklevoss ETF in March 2017. Approval of the ETF can only bring greater liquidity to Bitcoin, while never approving an ETF will only serve to disenfranchise specific investor segments.
Bakkt set to test launch in July
The physically settle futures exchange Bakkt announced that it would launch user testing in July. The company has been in close collaboration with the Commodity Futures Trading Commission to develop fully compliant contracts and clearing. They are set to launch both a daily and monthly settled product. This product would be the first of its kind on a regulated exchange. Since Bitcoin is a unique bearer instrument, custody of the asset is of the utmost importance which is why the firm is seeking licenses as a trust company in New York. The approval of the New York Department of Financial Services is essential in the launch of Bakkt.
CME reaches highest notional volume ever
On 13 May the CME Group reported over a billion US dollars in record volume for their Bitcoin Futures products. This volume dwarfs that previous record by 50%. This brings the volume traded for at over $6.6bn for May. We see a similar trend for other derivative providers, such as Crypto Facilities and Deribit showing record months in May. This trend highlights that institutions are increasingly using derivatives to both hedge and gain exposure to the nascent technology.
SEC delays Bitcoin ETF again
This week the SEC decided to delay the decision on the VanEck Bitcoin ETF, a day earlier than expected. Despite this surprise the BTC price barely moved on the news, possibly signalling the lack of speculation around an ETF approval. The new deadline for a decision is 22 August. The market has been unfazed by ETF decisions ever since the rejection of the Winklevoss ETF in March 2017. Approval of the ETF can only bring greater liquidity to Bitcoin, while never approving an ETF will only serve to disenfranchise specific investor segments.
Bakkt set to test launch in July
The physically settle futures exchange Bakkt announced that it would launch user testing in July. The company has been in close collaboration with the Commodity Futures Trading Commission to develop fully compliant contracts and clearing. They are set to launch both a daily and monthly settled product. This product would be the first of its kind on a regulated exchange. Since Bitcoin is a unique bearer instrument, custody of the asset is of the utmost importance which is why the firm is seeking licenses as a trust company in New York. The approval of the New York Department of Financial Services is essential in the launch of Bakkt.
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