A Comparison between Bitcoin Futures and Spot Trading Volume

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The digital currency market has long anticipated greater adoption by institutional investment firms. In December 2017, this appeared one step closer to fruition when the Chicago Mercantile Exchange (CME Group) and the Chicago Board Options Exchange (Cboe Global Markets) launched competing bitcoin futures products.

One year since the inception of US regulated bitcoin futures contracts, our research findings demonstrate that bitcoin futures trading volume has fallen since reaching a peak in the summer of 2018. Further, our results demonstrate that total bitcoin futures trading volume across the CME and the Cboe reached near parity with total bitcoin spot trading volume across five of the largest US accessible digital currency exchanges.

 

Bitcoin Futures Trading Volume at the CME Surpasses Volume at the Cboe

We tracked notional bitcoin futures trading volume at both the CME and Cboe since December of 2017. While both firms launched competing products, in the same month over the course of 2018, the Cboe lost significant market share to the CME. In the chart below, we diagram notional trading volume comparison between the CME and Cboe over time.

Figure 1: CME vs Cboe Bitcoin Futures Notional Trading Volume Over Time

CME vs Cboe Bitcoin Futures Notional Trading Volume Over Time

Data for chart sourced from the CME and Cboe

 

Futures Trading Volume Nearly Reaches Parity with Spot Trading Volume

Bitcoin spot trading volume at popular US based digital currency exchanges, such as Coinbase, have seen trading activity fall considerably as digital currency prices declined after reaching a market peak in December 2017/January 2018. At the largest US accessible digital currency exchanges, spot trading volume fell approximately 85% between January 2018 and October 2018 before spot volumes slowly began to rise in November and December of 2018.

Figure 2: Bitcoin Spot Notional Trading Volume Over Time

Bitcoin Spot Notional Trading Volume Over Time

Data for chart sourced from the TradeBlock Professional Platform

The decline in spot trading activity may, in part, be explained by an exit of retail traders from the space following a collapse in asset prices. This is inline with falling search engine trends for “bitcoin” and “crypto-currency” which have been used as a proxy to gauge retail investor sentiment. Interestingly, during this period of time, bitcoin futures trading activity rose between December 2017 and August 2018.

Figure 3: Combined Bitcoin Futures Notional Trading Volume at the CME and Cboe

Combined Bitcoin Futures Notional Trading Volume at the CME and Cboe

Data for chart sourced from the CME and the Cboe

As shown in Figure 3 above, peak notional trading volume in bitcoin futures contracts occured in the months of July and August before beginning to decline in the fall and winter of 2018. November appears to be an exception, as futures trading volume experienced a near term rise inline with heightened volatility in asset prices following sudden price crashes during the month. December 2018 registered the lowest monthly trading activity in bitcoin futures since inception of the investment products.

While bitcoin futures trading volume initially saw significant growth each month following inception, spot trading activity was steadily declining during this same time period. Given these divergent trends, total futures trading volume across the CME and Cboe reached near parity with total spot trading volume across five of the largest US accessible digital currency exchanges. This changed somewhat recently as futures volume has fallen while spot volume has picked up modestly. In Figure 4 below, we compare futures notional trading volume vs spot notional trading volume over time.

Figure 4: Futures Notional Trading Volume vs Spot Notional Trading Volume

Futures Notional Trading Volume vs Spot Notional Trading Volume

Data for chart sourced from the TradeBlock Professional Platform, the CME, and the Cboe

 

These findings highlight that futures trading activity has declined significantly since reaching a peak in the Summer of 2018. Spot trading activity, similarly, has declined considerably. It will be interesting to see how these trends change, as the market prepares to launch several new bitcoin futures platforms. Bakkt, ErisX, and CoinFLEX are several firms looking to launch highly touted bitcoin futures products within the coming months. As these platforms come live, it will be imperative to continue to track futures trading volumes as they change over time.

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