CME Group has released data indicating that the Average Daily Volume (ADV) of bitcoin futures contracts grew 93 percent in the second quarter of 2018. In a July 20,2018, tweet on its Twitter account, the derivatives trading giant also revealed that over the same period, the rate of open interest (OI) in bitcoin futures expanded by 58 percent.
Much Ado About Bitcoin Futures
Since the Chicago Board Options Exchange (CBOE) and CME announced the introduction of bitcoin futures contracts in December 2017, there have been several divergent opinions on the impact of cryptocurrency derivatives on crypto prices.
In May 2018, BTCManager reported that the Reserve Bank of San Francisco issued a letter stating that the reason for bitcoin’s sudden price crash following its December 2017 all-time high was the introduction of bitcoin futures trading into the market.
(Source: Twitter – CME Group)
The above data from CME’s tweet indicates that for better or for worse, the market has clearly decided that bitcoin futures trading is here to stay.
New CME Data And Its Implications
The key implication of increased bitcoin futures ADV is that it confirms the strength of bitcoin as an asset class. At a time when bitcoin shed a significant amount of its value, the fact that the market recorded a 93 percent growth from one quarter to the next indicates that the market now views bitcoin as a sustainable and robust asset class with good future prospects.
The open interest (OI) rate refers to the number of open contracts on bitcoin futures. A 58 percent jump on Q1 indicates that there is a high level of market interest in trading bitcoin futures because many contracts are still open. Investors will doubtless be keeping a close eye on the bitcoin futures market because an OI growth of 58 percent from Q1 to Q2 indicates that the amount of money flowing into the market is increasing at a rapid rate.
The tweet from CME Group reads in part:
“Bitcoin futures average daily volume in Q2 grew 93% over the previous quarter, while open interest surpassed 2,400 contracts, a 58% increase.”
OI is also viewed as an indicator of future market trends, and as such, it is generally considered by investors as a good proxy for a reliable investment indicator.
The general and sustained market interest in this asset class means that more financial institutions and investors who previously did not place much stock in bitcoin and crypto may now be attracted to the asset class because of its sheer ubiquity. Already this seems to be happening, as a number of institutions have publicly announced that they are reevaluating their stance on bitcoin.
In January 2018, NASDAQ CEO Adena Friedman revealed that bitcoin futures contracts trading is on the horizon for the second largest stock exchange in the world. BTCManager also reported earlier in July 2018, that BlackRock, the world’s largest exchange-traded fund (ETF) is reviewing its historically negative stance on cryptocurrencies, with the company set to invest in bitcoin futures.