By
Steve Muchoki
April 19th, 2024
Here a look into where the Bitcoin Futures have reached so far and how far they have performed vis-a-vis the expectations created.
The talk about Bitcoin Futures once again catches steam as ICE announced the launch of Bakkt Bitcoin Futures this December. ICE’s Bakkt platform will offer Bitcoin Futures settlement in physical Bitcoin tokens. Many experts have praised ICE’s entry into the crypto space saying that it will create further room for institutional entry.
Now that ten months have passed since the launch of first Bitcoin Futures in December 2017, let’s have a look where we have reached so far. Exactly one year back, the CME Group first talked about releasing its Bitcoin futures contracts in the crypto market. Soon after that, the Bitcoin price caught wildfire roaring higher and higher without looking back. By the time of launch, Bitcoin hit its all-time high of $20000 turning the attention of the global financial community towards itself. Note, both CBOE and CME launched their Bitcoin Futures contracts almost during the same time in December 2018.
Many industry experts then thought that Bitcoin futures will usher huge liquidity in the crypto market. Undoubtedly, the primary reason for launching Bitcoin Futures was to attract higher institutional participation. Ten months have passed since then, but have things rolled down as expected? Bloomberg present some key insights into the journey so far!
Bitcoin Futures Not Keeping Up the Hype
Michael Unetich, vice president of cryptocurrencies at Chicago-based Trading Technologies International Inc. says things kicked-off pretty well at the beginning. Experts were expecting tens of thousands of daily order. However, “the market just wasn’t ready for that to happen,” says Unetich.
After CME recently released its Q3 report, Craig Pirrong, a finance professor at the University of Houston says “It has not been what you would call a roaring success”. Although the CME’s Q3 report shows Bitcoin Futures volumes picking up, there is no exemplary growth. Pirrong who is also an expert of futures trading said: “Institutional players have stayed on the Bitcoin sidelines, and as long as they are, the futures contracts are likely not to generate substantial amounts of volume.”
However, heads of both – CME and CBOE have accepted that things have not picked quite well as expected! CME Chief Executive Officer Terry Duffy told Bloomberg Television, “We’re not seeing huge flows” for Bitcoin contracts. Chris Concannon, Cboe chief operating officer, told: “There’s been more articles than volume”. “It’s a little bit shocking to me the attention this market gets versus its size,” he added. “The entire crypto market is a fifth of Apple.”
Pirrong also explains why the volumes of Bitcoin Futures have dried up in comparison to other commodities. For consumable commodities like wheat and corn, agricultural producers, farmers and even speculators use futures contracts to hedge their risks. This way they can focus on running their business.
For Bitcoin, there’s “a lack of any need for any hedging—there’s really no major commercial or institutional use for Bitcoin futures,” Pirrong says. “The natural clientele for a futures contract doesn’t really want or need Bitcoin futures. That might change someday. A lot of the institutional firms are putting their toe in the water.”
Bitcoin Futures Still Not A Complete Failure
However, Michael Unetich says that even though CBOE and CME Bitcoin Futures have fallen short of expectations, they can’t be considered a complete failure! Unetich says that many products the exchange launch first, don’t quite pick well in volume. “Many of them are killed off with very little fanfare,” he says. But Bitcoin futures are “probably considered statistically one of the more successful products, both out of the gate and with the growth in the first six months.”
Many have now pinned their hopes to the launch of Bakkt platform. One of ICE’s prime focus behind the launch of Bitcoin Futures is to make cryptocurrencies mainstream assets class. ICE believes that cryptos should not be limited for trading but should be made avaliable for daily spending. Only then it will truly attain the status for a mainstream asset class.