Bitcoin futures are often somewhat controversial. After all, they seem to have the effect of sending BTC price crashing each time a major new player enters the market. However, as with all things in the cryptocurrency industry, this is a marathon and not a sprint. CME and CBOE may have coincided with the lengthy bear market and Bakkt’s launch has so far been disappointing. However, here’s why this industry will see further growth ahead.
Binance Is Crushing It in the Space
Just a few days ago, the mighty Binance, the world’s most popular cryptocurrency exchange, put out an amazing tweet.
Open a Futures account in literally 2 clicks.
With futures, you have the chance to profit regardless of which way the market moves.
— Binance (@binance) October 3, 2019
24-hour BTC trading volume on its futures platform (launched just last month) has now exceeded that of the Binance.com spot market, at around 30,500 bitcoins.
Bakkt may have shown us that institutions aren’t quite ready to take the plunge but retail traders are blowing up the space!
Moreover, established players such as BitMEX have consistently shown how high demand is for Bitcoin futures, hitting a new all-time high for trading at over $16 billion in 24 hours in July. And now Binance is bringing even more retail traders over to futures.
CME Doubles Its Bitcoin Futures Offering
Last month, the largest player in the pond when it comes to regulated Bitcoin futures trading for institutional investors, CME, filed a petition to the U.S. Commodity Futures Trading Commission (CFTC) to double its BTC futures offering. The Chicago Mercantile Exchange wants to allow BTC futures traders to hold more open positions at a time.
In a letter to the CFTC in September, CME announced its intention to double its BTC futures offering from 1,000 contracts per spot month to 2,000 for any single investor. While it is uncertain whether any single trader would wish to hold that many contracts open, apparently the exchange sees future growth in the market, as a CME spokesperson commented:
“based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.”
Bakkt’s Launch Is Still Historical
It’s true that many people were expecting higher trading volumes and user numbers from Bakkt. The truth is that so far, it’s launch has been extremely disappointing. However, that does not detract from the fact that Bakkt still launched. That is historical in itself.
Bitcoin has been legitimized by the New York Stock Exchange. Institutional investors may not be flocking to get in on the action, but that doesn’t mean that they won’t when the time is right. After all, Bakkt is still the first regulated exchange to offer physically-delivered Bitcoin futures contracts.
There is still plenty of potential–and now more infrastructure–for institutions to come on board. Moreover, there is a massive accumulation of institutional dollars just waiting to be channelled into a major asset class.
To give an indication of just how much money we’re talking about, according to the Federal Reserve Bank of St Louis, around $2.14 trillion dollars of institutional funds are sitting around just waiting to be invested in a major asset class.
If only a very small portion of these dollars come over to Bitcoin futures with physically-delivered contracts, the markets and price could explode.
Commission-Free Bitcoin Futures Trading
Another interesting development on the horizon is a brand-new exchange launching called Digitex Futures with its public testnet slated for November 30. The company is bringing something new to the Bitcoin futures market and that is removing the commissions from trading.
This, the company believes, will create a high demand for the exchange and along with it, active liquid markets. According to CEO and Founder Adam Todd, Digitex will be a “paradise for day traders and scalpers since at last, the exchange won’t be punishing its most active traders through crippling commissions that make strategies like scalping almost impossible today.”
Digitex plans to remove commissions through a revenue model that is unique in the market. Traders on the exchange must trade in its native currency DGTX. This creates a constant demand for the token and allows the exchange to cover operational costs thanks to rising demand and token appreciation as well as a plan of token issuance starting from 2022.
Token issuance may have a temporary inflationary effect on the DGTX token price, however, the company is confident that this will be quickly offset by more traders coming to enjoy trading on a zero-fee exchange.
Nevermind Bakkt, Bitcoin futures is set for tremendous growth. From newer entrants to the market to existing players doubling their offering and continued innovation, this is the space to watch.