Bitcoin Futures Volume on CME Soars as Bakkt Debut Nears

Bitcoin futures

Cryptocurrency exchanges that are wondering where the bitcoin trading volume has gone may want to consider expanding into derivatives trading. The CME has experienced exponential growth in its bitcoin futures trading volume this summer, as evidenced by a doubling of activity in July and similar momentum this month. CME month to date has generated “daily futures volumes of 30,000 bitcoin equivalent”, as per the FT, despite the meager performance in the bitcoin price.

In fact, bitcoin futures trading volume on CME outpaced that of its rival the CBOE, the latter of which debuted bitcoin trading futures contracts first and whose August daily futures volume is in the doldrums at 5,000, as well as spot market trading in bitcoin on popular cryptocurrency exchange Coinbase, where trading volume hovers at 11,000-plus BTC, according to the Financial Times.

Courtesy: Financial Times

Bakkt Says No Leverage, No Margin Trading

The CME and CBOE have been jockeying for market share in the bitcoin futures market since year-end 2017, and now they’ll have another exchange to contend with — the Intercontinental Exchange, or ICE and its new Bakkt exchange, which is set to make its debut in November. It’s been a couple of weeks since the Bakkt announcement and Kelly Loeffler, who is at the helm of the new company, said that the exchange was formed in response to an “evolving market”, one in which “price discovery” for the bitcoin price is at the center.

On Bakkt, trading in bitcoin futures is “fully collateralized or pre-funded,” said Loeffler, adding that margin and leverage are not allowed.  “This supports market integrity and differentiates our effort from existing futures and crypto exchanges which allow for margin, leverage and cash settlement,” according to Loeffler in a blog post. The margin requirements for bitcoin futures on the CME and CBOE are 35% and 40%, respectively, according to reports.

Meanwhile, the CBOE isn’t sitting idly by and has restructured its bitcoin futures terms in an attempt to bolster volume. According to the FT, the CBOE lifted the limits on the number of XBT futures contracts a trader could have fivefold to better resemble the opportunity at the CME. According to a regulatory filing with the CFTC, the CBOE did this to “promote competition between CFE’s market for XBT futures and CME’s market for bitcoin futures by providing for more of a level playing field in terms of the position levels that can be held in both products.”

We will have to wait and see which concessions, if any, derivatives exchanges make when there’s another player on the block, Bakkt.

Featured image courtesy of Shutterstock.

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.