Ever since Bakkt’s physically-settled bitcoin futures contracts launched on Sept. 22, 2019, the product has been slowly gathering steady interest. Bakkt’s BTC futures started off slow and paled in comparison to top exchanges with leverage like Bitmex.
Then on Oct. 10, BTC slid from $8,600 to a low of $8,200 across international spot markets. Coincidentally, Bakkt’s futures saw a sudden spike and volumes jumped 796% during the 24-hour period.
Bakkt’s bitcoin core (BTC) futures product saw another all-time high as the spot market price of BTC plummeted under $7,000 on Friday morning, Nov. 22. Bakkt saw 2,728 contracts traded ($20 million) and $1.75 million in open interest outpacing the record of 1,179 contracts on Oct. 25.
After BTC Spot Market Prices Shed Billions, Bakkt’s BTC Futures Volumes Reach Another All-Time High
After the exchanges’ all-time high (ATH), Bakkt’s market seemed calm until Oct. 23, when BTC spot prices dropped from the $8,200 foundational support to $7,365 across global exchanges. Again, Bakkt’s trade volumes lifted significantly after the spot market downturn and Bakkt volumes saw another ATH with 1,179 contracts. On Oct. 25, following the ATH, Bakkt CEO Kelly Loeffler revealed the firm will offer options on bitcoin futures in December.
It’s only 2:05PM ET and we’ve already traded 2,367 contracts today, beating our previous record of 1,756
– Bakkt (@Bakkt) November 22, 2019
After the last ATH, Bakkt BTC futures volumes have been steadily gaining stronger interest. On Nov. 19, BTC spot prices were hovering around $8,300 but the next day the price per coin dropped to $8,000. Since then BTC has plummeted below the $7k zone and the BTC spot price is currently $7,200. After the Oct. 25 ATH, Bakkt averaged just above 1,000 contracts daily but after the BTC price dump, Bakkt touched an all-time high again with 2,728 contracts traded ($20 million).
On Nov. 22, Bakkt’s BTC futures also saw $1.75 million in open interest and increased by 29%. Prior to all the action on Bakkt’s exchange and global spot markets, BTC short contracts saw a spike in volume as well on exchanges that offer leverage. Because Bakkt is seeing a lot more interest, speculators believe it is adding a whole new type of price discovery to crypto markets.
Physically-Settled BTC Futures: A Critical Element to New Price Discovery
With Bakkt, the buying and selling of BTC is fully collateralized, which could add a much bigger element to the market’s fluctuations. In contrast to the Chicago exchange CME Group’s cash-settled BTC contracts, Bakkt buyers obtain real BTC after a contract expires. With CME’s contracts, market participants pay or receive the difference in U.S. dollars after an expiry.
Cash-settled BTC futures contracts have been around since December 2017 and have had little influence on the spot price of BTC. However, with Bakkt’s physically-settled BTC futures, BTC must be delivered on the second business day after the contract’s expiry. This means that the Bakkt warehouse creates actual demand for real BTC on exchanges and it will be required to have enough collateralization to meet the rising demand at all times.
In the midst of fresh demand for Bakkt’s physically-settled BTC product, the exchange also announced a cash-settled bitcoin futures product slated to launch next month. Bakkt’s new cash-settled BTC offering will be available on the Intercontinental Exchange (ICE) Singapore. The President and COO of ICE Futures and Clear Singapore, Lucas Schmeddes, believes the new crypto product will give Asian investors “exposure in bitcoin markets.”
Bakkt will have to compete with Asian exchanges that see the highest bitcoin derivatives volumes worldwide by offering deep leverage and perpetual contracts. Exchanges like Bitmex, Bitflyer, Bitfinex, and Okex eclipse Bakkt’s regulated futures products by a long shot. For instance, in a mere 24-hour period on June 26, Bitmex’s daily volume surged to over $11 billion with $1 billion in open interest.