Observations following the first week with Bitcoin futures

Ole Hansen

Head of Commodity Strategy
Ole Hansen joined Saxo Bank in 2008 and has been Head of Commodity Strategy since 2010. He focuses on delivering strategies and analyses of the global commodity markets defined by fundamentals, market sentiment and technical developments.

As we approach the end of the first full week of trading in the Bitcoin future offered by the Cboe exchange we take a look at the early developments. 

Elevated spread between future and spot

The future has so far maintained a premium to the underlying price which is the daily 4 pm ET auction price (pink line) on the Gemini Digital Exchange. The future should, with the exception of a small spread between spot and the forward settlement date on the future, closely track the Bloomberg spot price (green line). This discrepancy is among others a sign of the market being out of balance. Something that most likely has been caused by the initial decision by several brokers to limit or prohibit short selling. 

However, the premium has started to come down on news that some brokers will begin to allow short selling albeit at a much higher required margin than the one outlined by the exchange. Only a handful of brokers cleared futures upon the debut last Monday. 

Bitcoin Future

Source: Bloomberg

Liquidity and volatility 

Based on the very short sample period we find that the price has been exhibiting signs of stability this past week with the 5-day historical volatility halving from 150% a week ago to 75% today. The traded volume however, has been a disappointment. After trading 4000 lots on Monday the volume has since then moved closer to 1500 lots/day.

bitcoin liquidity

With the CME being a more recognised exchange for futures trading we need to wait and see the impact when they launch their 5X contract next week. 

You can access both of our platforms from a single Saxo account.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)