The Bitcoin market has grown to include futures – the simplest type of derivative financial product.
What are the futures?
The futures are financial derivative contracts that force the parties to trade an asset at a predetermined price and date in the future. The buyer must buy or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiry date.
These markets account for a significant portion of the spot market. Today this market has reached 5 billion dollars in daily volume.
Bitcoin price discovery shifts to futures markets
In 2019, due to the perceived effect of futures, bitcoin’s price detection mechanism has changed. These markets invite traders to bet only on price movement, without much concern about the scarcity of BTC or real-world asset adoption.
And transactions are made based on its dollar price because BTC is notoriously unstable. The latest information shows that futures volume reaches 5 billion dollars a day.
Both cash-settled futures of CME, permanent swaps on BitMEX and OkEX, and bitcoin futures delivered on Bakkt and Binance JEX all belong to this volume.
Bitcoin Futures market trading at least $5bln on a daily basis pic.twitter.com/lSovIZDQrR
— skew (@skewdotcom) November 28, 2019
Futures markets compete with spot price discovery
The effect of futures is most noticeable in countering BTC whales. During periods of high volatility for bitcoin, the futures market has soared in price, broke the previous record of the prior week and continued the recording chain over the past months. About two months after its launch, Bakkt currently trades over 2,000 BTC per day.
Even traders who don’t have access to actual Bitcoin can bet on the price. At the same time, by selling directly, whales can try to influence the spot market. The futures markets also cannot reflect the actual demand for BTC in addition to price speculation.
Bitcoin trading volume remains at nearly $ 18 billion for 24 hours, still with the popularity of spot markets. But futures markets also respond immediately to daily growth. Over the past days, Bakkt futures have set a series of open trading and interest rate records.
Daily summary of Thursday’s Bakkt Bitcoin Monthly Futures:
? Traded contracts: 2832 ($21.17 million, -50%)
? All time high: 5671 (11/27/2019)
? Open interest: $4.31 million (+4%)Realtime updates: @BakktBot – Sats for servercosts: https://t.co/TF6sNUwWpO pic.twitter.com/Oy1Uusx7vp
— Bakkt Volume Bot (@BakktBot) November 29, 2019
Bakkt volume is still volatile but it shows that traders are waiting on the sidelines, especially during higher BTC volatility. As Skew’s statistics show, the past few days of futures markets immediately responded to higher volumes in November, when BTC prices posted more impressive daily moves.
BTC futures have launched a new development of market sentiment. On the other hand, because the activity of bots and whales can change transactions in a few hours, the spot market was unpredictable.
┌#BTC/USDT [4h] Report
├Close: 7606.8 ₮ (-3.2 ₮)(-0.0%)
├4h Vol : 243.65M ₮(-13%)
┊├Buy[50%]: 121.57M ₮(-13%)
┊├Sell[-50%]: -122.08M ₮(-13%)
┊└Net[0%]: -503.8K ₮ ← -1.15M
└ ?BEARISH under [7591.60]?️ pic.twitter.com/S8qTwPQNct— Binance Futures Tracker (@FuturesTracker) November 28, 2019
Bitcoin trades at an average of $ 7,589.05, with the BitMex futures market at $ 7,600.50. Only BitMex was responsible for $ 2.4 billion in reported volumes on Friday.
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