Do Retail Investors Trump Institutions On Futures Trading?

Bakkt’s disappointing start was not well received by the market. The platform succeeded in generating considerable hype before launching, only to flounder once it was made available.

The dissatisfaction was soon felt, as Bitcoin lost 20% of its value in a couple of days after the launch. It would be wrong to pin the entire blame on Bakkt – markets are a complicated machine, where Bakkt only exacerbated existing trends.

But the evident failure of Bakkt may have cast some doubts on the entire concept of institutional investment. After all, the largely retail-driven BitMEX has more than two billion dollars in daily volume, while Bakkt struggles to reach two million – seemingly showing institutions are not interested.

The reality is a bit more complicated though, and several factors converge to make BitMEX’s actual figures lower, and institutional trading figures higher.

Bakkt’s marketing campaign may have tried to position it as the only bastion of institutional investment in cryptocurrencies, but that is far from the truth.

Bakkt was created by Intercontinental Exchange, the world’s third-largest exchange, known for purchasing a by-then somewhat decrepit NYSE in 2013. The second place is occupied by the Chicago Mercantile Exchange, ICE’s arch-rival in futures and other markets, where cryptocurrency is just another battleground. 

CME launched Bitcoin futures trading all the way in late 2017, more than eight months before the first Bakkt announcement. The significant head start allowed CME to gain a large market share, especially as the other competitor, CBOE, withdrew its futures offering in 2018.

The graph shows that CME’s volume generally trends at 3,000 contracts traded, with each futures contract being for 5 BTC. The total amount is thus approximately $120M, a far more respectable figure than Bakkt’s current average.

ICYMI: Tuesday's Bakkt Bitcoin Monthly Futures: