Bakkt’s cash-settled Bitcoin futures have been launched in December 2019 on fashionable demand. Bodily settled Bitcoin futures uncovered merchants to the chance of holding the asset and didn’t precisely fly amongst derivatives merchants.
Regardless of the preliminary roadblocks, cash-settled Bitcoin futures have doubled in quantity up to now six months. What’s attention-grabbing is that it has maintained a constant buying and selling quantity.
This chart is extra constant than cash-settled futures quantity on CME or mixture throughout prime derivatives exchanges, based mostly on information from skew.
The mixture every day volumes on prime exchanges and CME present important drops. Amongst prime causes, the preferred one is the overall notion that cash-settled futures will be manipulated fairly simply, as they settle utilizing a method taking costs from some third get together spot market with doubtlessly skinny volumes, relatively than merely delivering the underlying at expiry.
Derivatives merchants keep accounts on spot and derivatives exchanges. They take lengthy/quick positions within the cash-settled futures on derivatives exchanges and through settlement they use their pockets stability on spot markets to maneuver the reference price up/down, and that is the value captured by Derivatives exchanges and used of their settlement method.
This manipulation is feasible solely due to low liquidity on spot exchanges from the place price reference is drawn. As soon as these merchants obtain their revenue from cash settlement they unwind their place on spot exchanges. Whereas this manipulation is tough to hint, there’s a sharp transfer proper earlier than the scheduled settlement and that is clearly seen within the CME chart. Nonetheless, this isn’t evident in cash-settled Bitcoin futures on Bakkt.
On Bakkt, the expansion is constant for the previous six months. Nonetheless, Bakkt’s chart for physically-settled Bitcoin futures has a special development trajectory.
Quantity picked up within the final week of July 2020 and it has been persistently above $80 million, crossing $100 million a couple of occasions. Money-settled futures have been extra fashionable in comparison with physically-settled futures and there’s constant development within the former. This reveals that Bitcoin futures contracts on Bakkt have persistently carried out for the previous 6 months and the demand for a similar is constant on the exchange.
Bakkt Bitcoin futures contracts may be the one ones that aren’t manipulated and the one ones that has doubled in quantity with constant development up to now 6 months.