This article comes fromdecrypt, original author: Rakesh Sharma
Odaily Translator |
Odaily Translator |
Trading Bakkt's physically delivered bitcoin futures contracts has been plagued by lackluster volumes since its launch about three weeks ago, and while there are now some signs of recovery, it appears more patience will be needed to see if the trend can continue.
With the support of Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, Bakkt Bitcoin futures exchange was officially launched last month with the huge mission and ambition to promote Bitcoin into the mainstream.
However, the reality is always cruel.
After the launch of the Bakkt business, it was not as popular as expected, and the transaction volume continued to be sluggish. Some analysts even said that its poor start was one of the reasons for the recent plunge in the Bitcoin market. However, after the first few days of mediocre performance, the trading volume of the monthly physical delivery bitcoin futures contract on the Intercontinental Exchange futures platform has begun to show signs of life. Last Wednesday (October 9), the Bakkt futures contract traded Volume hit an all-time high of 224 contracts, a jump of 796% from the previous day when only 25 contracts changed hands.
But just when people thought that Bakkt's business would pick up, their trading volume dropped rapidly again, and reached the lowest point at 8:45 am Eastern Time on October 10th, and then began to pick up slowly. In Bakkt's monthly There are only 80 contracts on the trading platform for physically delivered bitcoin futures contracts.
Charles Phan, chief technology officer of the encrypted derivatives platform Interdax, explained that the Bakkt futures contract rose first and then fell. Traders reacted to the SEC’s rejection of the Bitwise Bitcoin exchange-traded fund, he said:
"The results are now very clear, and volumes are coming back down."
“When someone trades with a market maker on one exchange, the market maker may also be hedging on another, so the volume across exchanges is actually relative. In this case, Bakkt is a proxy for market maker activity. Beneficiaries, as Bakkt received funds from traders after the SEC announced its decision on the Bitcoin ETF.”
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Returning to normal is difficult for Bakkt?
On other exchanges, a return to business as usual may be a welcome relief. However, in Bakkt, this is problematic.
In fact, on the day that Bakkt hit an all-time high in trading volume, the gap between them and CME Group was still huge. Investors traded an average of 5,212 Bitcoin futures contracts at CME Group, with each contract trading at 5 BTC. This means that on a day when Bakkt recorded its highest volume ever (224 futures contracts), CME traded an average of 26,060 BTC.
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Why is Bakkt's transaction volume so low?
In the past, the inflow of trader money into CME Group was interpreted as a sign that institutional investors were comfortable with bitcoin futures. But right now, the silence on Bakkt from institutional investors seems baffling.
Some people think that it may be because Bakkt's futures contracts are physically settled, which means that traders will receive physical bitcoins when the contracts expire; on the other hand, CME's bitcoin futures contracts are settled in cash. Settled, which means traders receive cash equivalent to the price of Bitcoin when the contract expires. Vaibhav Kadikar, founder and CEO of decentralized market prediction platform CloseCross, explained:
"Cash-settled is now more attractive to speculative investors, and those speculative investors are more likely to choose to invest in CME Bitcoin futures contracts for cash yields. Given that cash-settled Bitcoin futures contracts tend to It will attract more speculative investors, so the market demand will be higher.”
Cash-settled bitcoin futures contracts also point to a deeper fundamental problem.
Mati Greenspan, senior market analyst at eToro, a well-known trading platform, said:
“Wall Street still doesn’t understand the concept of physically-settled bitcoin futures, in my opinion. One of the biggest attractions of the Bakkt contract is that you can own bitcoin, a scarce asset, that appreciates significantly after the contract expires .”
Not only that, Bitcoin ownership and contract duration may be two other main reasons for Bakkt's lower trading volume. So far, Bakkt has no publicly available data on the exchange’s daily bitcoin futures contract volume, but according to Mati Greenspan, it is “very low.”
“The very nature of futures contracts is for miners looking to use bitcoin futures contracts to hedge production costs and lock in profits, which is not something that can be effectively done every day.”
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A "chicken and egg" problem
Ryan Alfred from Digital Assets Data, an encrypted hedge fund data service company, said that Bakkt is now caught in a "chicken and egg" problem, and it may take a long time for its trading volume to pick up. In essence, this situation may be caused by Wall Street's evaluation of Bakkt, so even if its platform is struggling with the low trading volume of futures contract products, it still needs to hold on.
According to Ryan Alfred, due to the lack of qualified bitcoin custodians, institutional investors will not blindly invest in bitcoin, and Bakkt, a regulated cryptocurrency custody solution provider, is likely to be the first choice for institutional investors to deposit funds . However, institutional investors are always very cautious, they do a thorough check and evaluation before allocating funds, this check will depend on the effective function of the platform, which itself depends on the trading volume. Judging from the current situation, it may be a while before Bakkt wants to get the blessing of Wall Street.
