Bitcoin Futures Prices Jumped During Third Quarter

The average daily trading volume for bitcoin futures jumped by 41% during the third quarter, according to the latest statistics from CME. Trading volume for bitcoin futures touched a high of 12,878 contracts worth approximately $530 million on a single day in July. The average daily volume of trading during the third quarter was equal to 5,053 contracts worth $177 million approximately.  

“With open interest and liquidity on the rise, more market participants worldwide are using BTC to manage risk in changing markets,” the exchange stated. Open interest in bitcoin futures rose by 19% as compared to the previous quarter and averaged 2800 contracts in the third quarter. The price of bitcoin futures during this period mirrored the cryptocurrency’s tepid show in trading markets and mostly declined. 

A Limited Effect On Cryptocurrency Ecosystem

The CME’s announcement is a mixed bag. On the one hand, a bump in trading volumes for bitcoin futures is good news because it translates to increased liquidity. However, those volumes are still a fraction of trading amounts at spot exchanges for bitcoin. More importantly, they barely register as a blip as compared to futures volumes in gold, a commodity that bitcoin aspires to. Then there is the fact that prices declined as open interest numbers rose. Typically, this is an indicator of a downward trend in futures markets. 

When they were launched at CME and CBOE in December last year, bitcoin futures contracts were expected to bring liquidity to the bitcoin ecosystem, reduce volatility, and boost prices for the cryptocurrency. But their effect on the cryptocurrency ecosystem has been limited. Trading volumes for bitcoin futures contracts have been thin. Institutional investors have largely stayed away from the contracts leaving the field open to retail players. Unlike other commodities, where futures prices play an important role in setting spot prices, bitcoin futures have mostly followed price movements at spot exchanges. A May study by the San Francisco Fed contended that bitcoin futures might be responsible for bitcoin’s downward slide this year but did not provide enough evidence.

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns 0.21 bitcoin and 1 Litecoin.

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