- Bakkt has seen a 1,600% increase in the delivery of physical Bitcoin (BTC) on its futures contracts.
- The increase is much higher than in previous months, but could soon decline again.
According to data collected by Arkane Research, the crypto exchange Bakkt has seen a 1,600% increase in the delivery of physical Bitcoin (BTC) for futures contracts. The exchange, operated by the Intercontinental Exchange (ICE), launched the Bitcoin futures on September 23, 2019.
The start of the financial derivative triggered great expectations in the crypto community. This is because the futures contracts are physically backed by Bitcoin. Many believed that this possibility would be the trigger for a new bull run, as it could increase demand for BTC. Nevertheless, trading of Bitcoin futures at Bakkt got off to a disappointing start. Nevertheless, trading volumes rose sharply in the following months, reaching a record level in October.
However, the level of delivered Bitcoin for the settlement of futures contracts has remained low since its introduction. Only 15 futures contracts were settled on the exchange in October. There was a slight increase in November, and the physical delivery of 17 Bitcoin was reported, before the volume in December fell to only 8 contracts. These figures are even more meaningful when looking at the trading volumes recorded during these months: It rose from 73 BTCs worth USD 700,000 in September to 1,785 BTCs worth USD 12.86 million in December 2019, according to the Bakkt Volume Bot.
ICYMI: Monday's Bakkt Bitcoin Monthly Futures:
📈 Traded contracts: 2150 ($20.01 million, +171%)
🚀 All time high: 6601 (12/18/2019)
💰 Open interest: $6.17 million (+14%)
— Bakkt Volume Bot (@BakktBot) January 28, 2020
January marked a new trend and the exchange has recorded an increase from 8 to 232 physical futures contracts settled for a value of $8 million. In addition, the Bakkt Volume Bot recorded a trading volume of 2;150 contracts worth $20 million (an increase of 171%) and an increase in the Open Interest of 14%, worth $6 million.
However, in the near future the physical Bitcoin delivered could decrease due to the launch of cash-settled Bitcoin Futures on Bakkt. The exchange has taken this step to compete with the CME. The cash settled contracts are listed on the ICE Futures Singapore and can be used worldwide without restrictions.
Critics on cash settled futures contracts
The acceptance of physically secured Bitcoin contracts in the Community is not the same for cash-settled contracts. These derivatives are heavily criticized for the influence or manipulation they have on the Bitcoin spot price.
According to research by Arcane Research, this was found to be the case with futures contracts offered by the Chicago Mercantile Exchange (CME). During the first months of the launch of these options, Bitcoin lost value in 75% cases about 1.5 days before the expiration of the contracts.
At the time of writing Bitcoin’s price stands at $8,998.29 and records an upward movement (2.59%) in the last 24 hours.