The rise of institutional adaptation was one of the main hooks for Bitcoin in 2019, and the volume of trading activity on crypto platforms aimed at accredited investors remains relatively low, but has increased noticeably and steadily in recent months.
Bakkt records a monthly volume of $161 million
The parent company of the New York Stock Exchange, ICE, operates a regulated Bitcoin derivatives market known as Bakkt. Bakkt had a record daily volume of 2,224 contracts on December 18, worth about $18.9 million. Throughout the month of December, Bakkt recorded a volume of $161 million.
“Bakkt™ Bitcoin (USD) Cash Settled Futures contract closed December with a total of 18,946 contracts traded, setting a daily record of 2,224 contracts on December 16.
Since the eagerly awaited start in the second half of 2019, strategists generally expected a slow start for Bakkt. It takes time for investment firms and brokers to introduce new institutional infrastructure and futures products, Three Arrows Capital CEO Su Zhu said:
“Bakkt is likely to be a trickle and then a flood. The reality is that most regulated futures contracts are poorly accepted on day one…”
Initially, Bakkt saw little volume, especially compared to spot exchanges and large margin trading platforms. Since the platform’s monthly volume now exceeds $100 million due to the cash-settled mechanism, it could have some influence on Bitcoin’s price development in the medium to long term.
CME has released new Bitcoin options
On 14 January, Tim McCourt, a CME Group CEO and global head of equity products, said that the company had introduced options on Bitcoin futures. McCourt noted that he is pleased with the growth of his Bitcoin derivatives.
“We are pleased that our CME Bitcoin futures have quickly become one of the most liquid listed Bitcoin derivative products in the world over the past two years, with an average of nearly 6,400 contracts (equivalent to 31,850 Bitcoin) traded daily in 2019”.
The rapid growth of both existing and newly launched institutional Bitcoin service providers, as well as the expansion of derivatives products by a large corporation like CME, shows that institutional demand is increasing.
It is premature to conclude that there is sufficient institutional demand for Bitcoin to drive the crypto-currency market upward in the short term. There is still a gap between the institutional market and spot or margin trading. Nevertheless, all data show that the institutional market for crypto is generally on a positive path for long-term growth.