Skew’s data show that in the whole week, the option products of bakkt, the bitcoin futures market operated by the Intercontinental Exchange (ice), the parent company of the New York Stock Exchange (NYSE), have hardly seen any trading volume.
The relatively low trading volume in bakkt options and futures market may indicate that the recent rise in bitcoin price is mainly driven by retail or individual investors.
Wall Street remained silent in the rise of bitcoin
According to MATI Greenspan, a former eToro executive and founder of quantum economics, wall street did not sell in the sharp rise of bitcoin in January. Greenspan told longhash in an exclusive interview:
“Wall Street is quite indifferent to the recent rise in currency prices, but they are not completely silent. The trading volume of bitcoin futures contracts settled by Zhishang group has undoubtedly increased. At present, the main trading volume comes from encrypted exchanges. “
Leveraged trading data show that retail investors have played an important role in the currency price rebound. Since January, the price of bitx has risen by nearly 50% to USD 9500 from USD 690.
The short-term price trend of cryptocurrency market is usually affected by leveraged trading market. On the bitcoin leveraged trading platform, traders can use up to 125 times of leverage to bet on the price trend of BTC. On platforms such as bitmex, Derby and currency security futures, sudden upward or downward currency prices will lead to a series of long or short contracts being liquidated.
The recent rise of bitcoin seems to be caused by a large number of activities on the leading leveraged trading platform. At the same time, platforms like bakkt that target qualified investors are not very active. This shows that institutions are largely not involved and stimulates the view that the current rise is unsustainable.
For example, as of February 1, the daily trading volume of bitmex was $2.5 billion. Even considering the average leverage ratio of 22 times, its daily trading volume is still $100 million. In contrast, bakkt’s highest daily trading volume in January was $44 million.
On bitmex, the open position contract (OI) of bitcoin has remained at about US $1 billion for several days, which is quite high. In leveraged trading, OI refers to the sum of open long and short contracts in the market. When oi reaches US $1 billion, this often occurs after a long rebound in currency prices, and the market tends to fluctuate greatly.
There are other bearish signs. Greenspan stressed that the activities on the bitcoin blockchain did not increase significantly in the whole range of currency price rise. This shows that prices have not risen in tandem with fundamentals.
Blockchain.com, which tracks all data on the bitcoin blockchain network, shows that the number of unique addresses and transaction volume per day have not increased in the past eight months.
Compared with the price of bitcoin, the slow growth of these fundamentals led commentators such as CNBC writer Brian Kelly to comment that the current rebound may not last.
“Activities on the bitcoin blockchain have not seen any significant increase. In fact, it has remained basically unchanged in this round of gains, “Greenspan said.
Another possible cause of low option trading volume: bakkt itself
On some days in January, such as January 7 and January 14, bakkt’s daily trading volume reached US $40.8 million and US $28.8 million respectively. These data are from bakkt volume BOT, an automated system for tracking official trading activities on bakkt, which is publicly displayed by the exchange.
For a strictly regulated platform targeting institutional investors rather than retail traders, such a figure may be high. But there is no doubt that compared with the major cryptocurrency exchanges (such as coinbase and coin security), the daily trading volume of less than $100 million is not enough.
The question is: to what extent is bakkt itself responsible for the current situation? At present, it is unclear whether the low trading volume of bakkt option market is due to less than two months since its launch, or simply because the existing option platform in cryptocurrency market is more attractive than bakkt.
Skew released the chart of total open positions of bitcoin options on January 21. It compares the OI of all major options exchanges, including deribit, okex, bakkt, CME and ledger X.
The proportion of people who are “at least a little familiar with” bitcoin has increased by nearly half, from 30% in October 2017 to 43% in April 2019. Among people aged 18-34, 60% said they were at least “a little familiar” with bitcoin, up from 42% in October 2017. Compared with older people, in terms of “a little familiar with” bitcoin, the number of people aged 18-34 is three times that of people over 65.
Skew found that deribit accounted for $472 million of the $554.6 million open positions, dwarfing both CME and bakkt.
Although bakkt launched its option product on December 9, 2019 and CME only started its option contract on January 13 this year, the daily trading volume of bakkt option is 2% lower than that of CME.
Considering the OI of all major option exchanges, although the market fluctuates greatly, the trading volume of bakkt’s option market may be lower than that of other platforms. The futures market is becoming saturated, and it is unclear whether bakkt has the conditions required for competition.
Will Wall Street trading volume decrease after the closing of each month?
Except for CME, the trading volume of institutional platforms is not high, although the monthly column chart of bitcoin on the price chart is about to close. The monthly close of cryptocurrency, which dominates the market, coincides with the expiration of CME’s January futures. Futures maturity refers to the settlement of futures contracts on a monthly basis, and investors need to adjust their positions.
For a long time, futures maturity, rising prices and oi leading leveraged trading platforms will lead to extreme fluctuations at the beginning of the month.
The maturity of futures does not necessarily point to a bullish or bearish trend in the market. Traders usually adjust their positions at this time“ Don’t let your guard down because futures are about to expire. Be prepared for accidents, “said Jacob Canfield, a cryptocurrency trader.
But overall, the rise in bitcoin, mainly driven by retail traders and leveraged trading platforms, is raising questions about whether the rise in January can continue.
Responsible editor; zl