Over the past few weeks, Bakkt’s Bitcoin futures market has been gaining an absurd amount of traction. During Wednesday’s trading session, the upstart’s daily volume surpassed 4,443 contracts (4,443 BTC) — up 60% from the exchange’s last record-setting day last week — by 12:12 PM PST. This is equivalent to about $32 million as of the time of writing this.
And by the end of the day, the market’s volumes finished the day at just under 5,000 contracts.
Two months after their debut, Bakkt Bitcoin Futures reached a record high of 4,443 contracts traded today – up over 60% from our last record-setting day
We look forward to building on this momentum as we approach the launch of the Bakkt Bitcoin Options contracts on Dec 9th
— Bakkt (@Bakkt) November 27, 2019
For some perspective, the cash-settled Bitcoin contracts from the CME Group saw nearly $500 million worth of volume on Wednesday, though that market is nearly two years old, and market leaders Binance, Coinbase, and Kraken saw $1 billion worth of volume in aggregate.
Regardless, this was still a massive achievement for Bakkt, as back during the September launch of the derivatives, the exchange was lucky to process more than 100 BTC worth of volume in a single day. Alistair Milne, a popular cryptocurrency commentator and investor, recently encapsulated Bakkt’s volume spike by saying:
Looks like Bakkt has >100x’d the volume they were doing at the end of September. >5000 BTC today
Looks like Bakkt has >100x'd the volume they were doing at the end of September. >5000 BTC today
— Alistair Milne (@alistairmilne) November 28, 2019
Wednesday wasn’t an out-of-the-ordinary day, though. Over the past week, Bakkt has seen over 1,000 Bitcoin worth of contracts traded each and every weekday, seemingly indicating that there has been an uptick in institutional interest in Bitcoin. This comes in spite of the fact that the cryptocurrency market has shed more than 50% over the past five-odd months.
Why Bakkt’s Bitcoin Futures are So Important
Sure, Bakkt may seem like just another Bitcoin futures market, though my research has indicated that it will have an extremely positive effect on the cryptocurrency market in the years to come. Pseudonymous quantitative analyst PlanB told me that Bakkt provides liquidity to this market in that “it gives investors an additional way to sell their investment, another exit.” He added that this extra exit “could be a reason to buy in the first place.
In this sense, Bakkt could create an ever-growing positive feedback loop for market liquidity. institutions delve into Bitcoin futures due to a robust custody offering and increased market liquidity, liquidity grows as new players enter the fray, and then more institutions are drawn in by the expansions in liquidity.
Unfortunately, though, not many institutions are taking advantage of the physical delivery aspect of Bakkt — which is literally the defining factor that sets it apart from, say, the CME. Economist and analyst Alex Krüger noted on Wednesday that while Bakkt has seen exponentially growing volumes, a mere 17 Bitcoin has been delivered for holders of the Bitcoin monthly future as of November 14th. This is a far cry from the hundreds of BTC worth of “open interest” that Bakkt investors currently have. This is relevant because at present, “Bakkt is not that different from the CME. It is almost entirely paper trading.”
Bakkt has bitcoin bulls excited.
Volume is growing exponentially. From a low base, but growing fast nonetheless.
But what makes Bakkt special for bulls is not its volume, but how many bitcoins are physically delivered.
In November, the number was 17 bitcoins. In October, 15. pic.twitter.com/04R4t6h1do
— Alex Krüger (@krugermacro) November 27, 2019
Featured Image from Unsplash