Record Bitcoin Options Market Volume Shows Institutions Keen on Crypto
A CryptoCompare report published on July 6 has closely analyzed monthly trends in the cryptocurrency exchange market and found that crypto derivatives volumes have begun to taper off after peaking this May. Crypto derivatives volumes dropped 35.7% in June to $393 billion.
The overall trend which was also observed in the spot markets can be partially explained by the lack of volatility currently seen in Bitcoin and the majority of crypto assets within the market. There are a few exceptions like DeFi tokens, which have outperformed Bitcoin (BTC) considerably in the last month.
Despite the drop in overall volumes for the derivatives markets, regulated options seem to be gaining popularity. In June, the total volume for Bitcoin options on the Chicago Mercantile Exchange (CME) rose by 41% to reach another all-time monthly high with 8,444 contracts traded. Meanwhile, BTC futures traded on CME decreased by 23% in June which was still the second biggest month in 2020.
While the soaring volumes in the CME are a pleasant sign for those who are patiently awaiting institutionalization as the catalyst which will bring Bitcoin and other cryptocurrencies to new heights, there are other factors pointing to this change.
Companies that cater to institutional needs are also jumping on the crypto bandwagon, further cementing this trend. For example, KPMG, one of the UK’s big four accounting firms, launched a cryptocurrency management platform called Chain Fusion. In a recent report by the firm, KPMG said:
“Institutionalization is the at scale participation in the market by small and large entities within the global financial ecosystem, including banks, broker dealers, exchanges, payment providers, fintechs and service providers.”
How institutions can change crypto
As institutions continue to hop into Bitcoin, it’s possible that this trend will continue which in turn can bring many advantages to the overall market.
“If you want to get serious money into crypto, you have got to build up their confidence that there are actually good trading venues […] If you’re an exchange and you have good incentives to report real volume, you may actually get institutional money coming in, but if you don’t have those incentives, they’ll stay away.”
The shift from retail to institutional investors, or at least the substantial increase in the engagement of the latter, may be a clear sign to exchanges that they must behave accordingly or be phased out.
These improvements may open the doors for the creation of the much-awaited Bitcoin Exchange Traded Fund (ETF) and other instruments which will lure institutional investors into the crypto sector.