The popularity of Bitcoin futures is falling. Looking forward to alternatives?

February 18, 2019

The first bitcoin futures appeared in December 2017. After a couple of hours after the auction started on the Chicago Stock Exchange CBOE , their price increased by a quarter. The cost of the first cryptocurrency in these contracts was 10% higher than the market. The demand for futures was huge, and in the meantime, just a week later, Bitcoin set a new price record, reaching $ 20.085 per coin. The next day, December 18, another Chicago stock exchange CME Group opened the opportunity to purchase fixed-term contracts for bitcoin. It is noteworthy that at the second site in the contract, the volume of the underlying asset was higher by as much as 5 times.

Unfortunately, January 2018 was not so favorable for Bitcoin , which went into a long peak. In it, he is now, breaking the mark of 400 days. This is the longest “fall” of the first cryptocurrency . The same fate befell the futures on Bitcoin , for which demand is currently minimal. Even when the price of the “king of cryptocurrencies ” fell by half, the volume of transactions with derivatives could be compared with the top five of the largest American cryptocurrency exchanges .

How much fast contracts can affect cryptoblocks ?

Why is the demand for futures so low? It is important to note here that there is no consensus about the connection between the serious growth of the crypto market and the launch of fast contracts for Bitcoin . For example, researchers at the University of Texas have suggested that the most likely cause is the extra emission of steblcoin Tether . In the fall, they began to consider this option in the Ministry of Justice, although they have not yet voiced their decision on this matter.

So how likely is it that the rapid growth of a crypto bank at that moment was due to the launch of futures? The emotional component could be, but not fixed. Moreover, there were other important dates, for example, the expiration date of fast contracts. In February, 789 futures positions out of 3692 were closed . This is too small a volume to seriously affect the price of cryptocurrencies Despite this, analysts conducted a study of the dependence of the price of bitcoin and altcoins to the completion of futures contracts. According to their data, the price of Bitcoin declined by 1.2-16% during the expiration periods of futures , which are traded on the CBOE exchange .Moreover, such a relationship is clearly not constant because on February 13, when the first fast contracts were closed, the cost of Bitcoin, on the contrary, increased by 1%.

In turn, there are those who took the opposite position and argue that there is no connection between the fall of the crypto market and the expiration of futures These include renowned analyst Danny Les and Jake Cervinski, lawyers at Kobre & Kim. The latter notes that non-deliverable contracts are traded on both Chicago stock exchanges This means that the process does not imply the acquisition of bitcoins themselves . Settlement is made only with the help of the necessary calculations.

Can Bakkt futures change anything?

ICE is the owner of several classic stock exchanges around the world, including the New York. They plan to launch deliverable futures through the Bakkt platform. Jake Cervinski is convinced that the need to acquire “live” bitcoins can positively influence the current situation. To make this possible, you need to wait for the appearance of custodial services. A well-known analyst Keithling Long, discussing this issue, noted that in the case of a crypto ETF and futures, we are still talking about derivatives. With this in mind, it is important to understand that no one can guarantee the excess volume of trading Bitcoin – Futuresthe amount of the first cryptocurrency that will be acquired by the Bakkt platform as collateral. Exactly the same doubts rightly concern two more platforms, Eris and CoinFLEX, which plan to launch trading in quick contracts for bitcoin . Moreover, none of them even announced what type of futures it will be.

Futures are not interested in large investors?

The key question is whether such tools, whether deliverable or non-deliverable futures, Bitcon-ETF or alternatives like Bitcoin-ETN can really attract institutional investors to crypto machines After all, it is about billions of dollars. At the moment, it remains only to fix the fact that the fast contracts from CME Group and CBOE did not arouse serious interest from classical investment funds. The same was noted by Mike Novograc, a famous cryptomillionaire.

In his twitter, he wrote that he absolutely couldn’t understand why those who manage billions of dollars of their clients don’t even invest one percent in bitcoin , even if they don’t believe in it. Low capitalization is definitely irrelevant here, because there are not rare cases when funds acquired shares, the capitalization of which is clearly less than $ 63 billion ( bitcoin capitalization ). The lack of custodial services also cannot be a hindrance, because they gradually appear. The same applies to problems with the regulation of the cryptocurrency market . This can hardly be considered a critical reason why institutional investors have not yet entered crypto markets .

Bitcoin – dummy?

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Alex Kruger, a well-known analyst, voiced one of the most likely reasons. He said that macro funds regard bitcoin as a scam. Because of this, the emergence of Bitcoin-ETF is very likely not cause any interest on their part. Even if it turns out to be a live bitcoin or futures based derivative .

This view of cryptocurrency did not come clearly from the SEC or similar departments. There are practically no countries that regard these digital assets as a real threat to the financial system. With this in mind, panic about the “crypt” comes more from the participants of the investment business. It is insurance funds, banks and the like that feel a real threat from cryptocurrency and seriously worry about their existence. Understanding this, it is quite logical why they are not attracted by the potential profit even from minor investments in cryptocurrency . But how to develop a crypto bank without serious funds from institutional investors?

States as the main factor in the development of cryptocurrency .

After such a long peak on the crypto market , a community of those who are interested in new technologies in the field of finance was formed around it. It was the last one and a half years that contributed to the fact that among the participants there are no more people willing to increase their capital in a short period of time. The further development will be primarily affected by the actions of states in relation to cryptocurrencies . Now it is many times more important than capital from investment funds.Those countries that will be the first in this issue will be able to get additional benefits for the economy. Moreover, such decisions can provide political leadership with additional voter support. At the moment, in this vein, the leaders are the United States and China. There are already very favorable conditions for registering rights to blockchain and crypto resolution.

So far this is just one step and there are still a lot of interesting things ahead. Who will be the first to charge a pension in cryptocurrency? Although there is already a similar experience in Venezuela, where Petro is being paid benefits by the state crypto-coin Petro. No less interesting is who will be the first to invest state reserves in cryptocurrencies? And whether it will be at all? Definitely yes. And it is precisely such actions that will primarily contribute to the larger development of cryptocurrencies, and not the launch of derivatives on local exchanges.

And if you want to start investing money, not waiting for the times, until the big players take it, and profit from it, but do not know where to start, start with our free course and good luck with your trading.

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