Market Optimism Declines as Bitcoin Futures Euphoria Ends

This week it seems the euphoria from the introduction of CME Group and Cboe’s bitcoin-based futures markets has fizzled. Since both companies announced launching their futures products, the price of bitcoin gained over three times its value in just 45 days. Since the derivatives markets have begun the futures products’ volumes has been lackluster, and both bitcoin derivative predictions and spot markets prices have dipped considerably.

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Pending Futures Markets Brought Hype and 45 Days of BTC Gains

Futures markets are here, but the excitement leading up to these investment vehicles was far more thrilling than they are today. When Cboe launched its bitcoin futures products called XBT, both spot and derivatives markets pushed up the price. Cboe’s January expiration contracts started off with decent volume as 1,583 products were sold. However, the following month’s contracts have dwindled down to less than 200 contracts for February and March. Initially, Cboe contracts predicted some pretty high prices reaching a high of $18,650, but now contracts are much lower as the last Cboe XBT trade was $16,930. Additionally, when Cboe launched, spot markets had spiked after suffering from a dip and reached a high of $19,650 across global exchanges.

The Futures Euphoria Begins to Wear Off

The spot market price dropped shortly after and hovered above the $18K territory for a few days until CME Group launched its futures markets. Even though CME contracts were well above the $20K region for the months of January through June, spot markets started a bearish crawl downwards. On December 19 the spot price of bitcoin core (BTC) dropped below the $16,000 zone, but has since rebounded to an average of $16,300 on December 20. Just like Cboe, CME’s bitcoin futures liquidity has been sub-par, even though the CEO and CME Group Chairman Terry Duffy said the company had seen “increasing client interest in the evolving cryptocurrency markets.”

CME’s bitcoin-based futures quotes have dropped considerably as well from over $20K predictions to $16,950 for January. It goes lower in February at $16,880, but predictions rise again for March and June leading to a higher bid of $17,275. Yet, just like Cboe’s product sale contracts, CME’s January expiry has a much larger volume than the following months. There are less than fifty for February, March, and June, but those numbers could change as time gets closer to those months.

The Futures Industry Association: Bitcoin Derivatives Were Rushed to the Market

Cboe markets are 5-8 percent higher than current spot prices, while CME Group contracts for January are only 2 percent higher than the global average. According to the Futures Industry Association (FIA), a trade group that represents the derivatives industry, the two companies “rushed” bitcoin futures into the market. The FIA reveals that the association still holds the opinion that there still is a lack of transparency and regulation involved with cryptocurrencies. For now, there are only a few brokerage services that offer the bitcoin derivatives products, while many brokerage services are still unclear on how to deal with these new investment vehicles.

What do you think about the lackluster performance of both Cboe and CME Group’s bitcoin futures markets? Let us know in the comments below.

Images via Shutterstock CME Group, and Cboe charts.

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