Starting from January this year, crypto derivatives trading continually increased on several trading platforms such as FTX, Bakkt, and CME. Both open interest and total volume are about to reach all-time highs as the cryptocurrency market experiences a gradual revival.
According to the CME Group, their Bitcoin futures platform alone reached an open interest of around 5,328 contracts ($237 million). All-time highs for all crypto derivatives platforms are expected as soon as Bitcoin breaks resistance at $9,000.
Gradual entrance of institutional money in 2020?
When CME Bitcoin futures platform opened in December 2017, the exchange has a severe lack of trading volume. However, when Bitcoin reached $13,000 in July 2019, the exchange hit a record-high at 5,252 contracts. Despite the current price being $4,000 lower, data shows that derivatives trading is about to reach a new ATH.
Apart from CME and Bakkt, several other cryptocurrency exchanges have reached far higher Bitcoin futures daily volume. Data from Skew Markets show that global volume hit $25 billion at the start of the week, the same time when Bitcoin surged as a result of CME’s Bitcoin options release. Even though that Bakkt and CME have institutional-level regulation, OKEx, Bitfinex, and BitMEX lead the way volume-wise.
Cryptocurrency experts believe that the sudden rise shows that Bitcoin has bottomed and that the market is headed for a full-fledged bull run. On the other hand, some hold the view that Bitcoin may dip one more time before the halving event in May. Besides bulls being overly enthusiastic, the Chinese New Year on January 25 may also be a reason for a dip.
While the sample size is certainly small, Bitcoin plunged several times before the Chinese New Year. If it were to happen again, we might return to the $7,000-$8,000 price range for a couple of weeks. If not, Bitcoin will entirely exit a bear market in anticipation of the reward halving event.