Physical delivery of Bitcoin (BTC) for futures on the Intercontinental Exchange (ICE)’s Bakkt platform is going strong, despite a tumultuous month for the markets.
https://t.co/c4AsKD4uxV — Greg Retherford (@RetherfordGreg) March 26, 2020
On March 26, it has been reported data from Arcane Research reveals that as of March 20, the number of traders opting to receive physical delivery of the cryptocurrency rose 44% on the month.
Physical #BTC delivery on @Bakkt increased 44% in March, although being relatively flat in USD. Despite the recent market instability, Bakkt seems relatively unaffected. pic.twitter.com/sZ1XEWqVM9 — Arcane Research (@ArcaneResearch) March 25, 2020
However, Bakkt’s Bitcoin futures contracts, the first of their kind to be physically settled in Bitcoin, first went LIVE in September 2019. At the time, many commentators stated that physically-delivered Bitcoin futures trading, which gives traders direct exposure to the asset, would represent a leap forward for the institutional acceptance of the coin.
While the physical delivery of Bitcoin upon contract expiry has significantly increased, other metrics for Bakkt in March, the volume of traded contracts and open interest, are both significantly down.
According to tracking data compiled by Twitter account Bakkt Volume Bot (@BakktBot), which is not affiliated with Bakkt but rather with the Dutch journalist and crypto author Gert-Jan Lasterie, the volume of traded contracts on Bakkt on March 25 was at 1,161 ($7.73 million), down from an all-time high of 6,601 on December 18, 2019. Open interest was at $4.16 million.
Wednesday's Bakkt Bitcoin Monthly Futures: 📉 Traded contracts: 1161 ($7.73 million, -32%) 🚀 All time high: 6601 (12/18/2019) 💰 Open interest: $4.16 million (-3%) Trade while you sleep and take your emotion out of the equation: https://t.co/W8ClGYnuNn pic.twitter.com/B9nhCNu4fN — Bakkt Volume Bot (@BakktBot) March 26, 2020
As Alex Krüger, the Global Markets Analyst and Trader, has previously noted that the number of traders opting for physical delivery had been underwhelming in the first months since the Bakkt contract’s launch.
Bakkt has bitcoin bulls excited. Volume is growing exponentially. From a low base, but growing fast nonetheless. But what makes Bakkt special for bulls is not its volume, but how many bitcoins are physically delivered. In November, the number was 17 bitcoins. In October, 15. pic.twitter.com/04R4t6h1do — Alex Krüger (@krugermacro) November 27, 2019
In late November 2019, he said:
“Bakkt has bitcoin bulls excited. Volume is growing exponentially. From a low base, but growing fast nonetheless. But what makes Bakkt special for bulls is not its volume, but how many bitcoins are physically delivered. In November, the number was 17 bitcoins. In October, 15.”
Likewise, in a subsequent tweet, Krüger argued that in fall 2019, Bakkt activity was “not that different from the CME. It is almost entirely paper trading”, a reference to the cash-settled Bitcoin futures on CME, which first launched back in winter 2017.
Bakkt has two futures contracts, monthly and daily. The daily settles every day rather than once a month, with physical delivery in the Bakkt warehouse. It's the one you buy if you want to buy bitcoin and store it in a regulated warehouse. Its volume is … zero … everyday. pic.twitter.com/a1VPS1Ild7 — Alex Krüger (@krugermacro) November 27, 2019
By December 2019, Krüger was observing that “almost nobody takes physical delivery,” by adding:
“This is not a problem. It is normal for futures traders to not take delivery, in all assets. But Bakkt is no panacea.”
However, the alternatives to physical delivery are choosing to roll over a contract, prolonging price speculation on the underlying asset.
In the case of CME’s cash-settled Bitcoin futures, their trading has historically drawn suspicion, with some claiming that Bitcoin’s price is vulnerable to manipulation in advance of contract settlements.
Thus, in December 2019, Bakkt officially confirmed its own launch of a cash-settled Bitcoin futures contract through ICE Futures Singapore.
Source: cointelegraph.com | Image: