Feb 03, 2020 10:50 PM | Joseph Young

Bakkt, a Bitcoin futures market operated by New York Stock Exchange (NYSE) parent company ICE, saw close to no volume for an entire week in its options products, data from Skew shows.

The relatively low volume on Bakkt’s options and futures markets may indicate that the recent Bitcoin upsurge has been primarily driven by retail or individual investors.

Wall Street quiet on Bitcoin rally

According to Mati Greenspan, former eToro executive and founder of Quantum Economics, Wall Street has been uninvolved in January’s Bitcoin rally. Greenspan told LongHash in an exclusive interview:

“Wall Street has been rather apathetic to this recent surge, but they haven't been entirely silent. Volumes on the CME Group's cash-settled futures contracts have certainly been elevated. With that, the main volumes do seem to be coming from crypto exchanges at the moment.”

Margin trading data suggests that retail investors played an important role in the rally. Since January 1, the price of Bitcoin has risen from $6,950 to $9,500 on BitMEX, a rise of nearly 38% against the US dollar. 

Short-term price movements in the cryptocurrency market are often swayed by the margin trading market. On Bitcoin margin trading platforms, traders can bet on the price trend of BTC using leverage up to 125x. On platforms like BitMEX, Deribit, and Binance Futures, sudden movements either up or down can cause a cascade of long or short contracts to become liquidated.

Bitcoin’s recent rally was seemingly caused by a high level of activity across leading margin trading platforms. Meanwhile, platforms like Bakkt that target accredited investors have seen low levels of activity. This suggests that institutions were not involved to a large extent, fueling the argument the current rally is unsustainable.

For instance, as of February 1, BitMEX is showing a daily volume of $2.5 billion. Even if the average leverage of 22x is considered, it shows $100 million in daily volume. In contrast, Bakkt recorded $44 million on its peak day in January.

On BitMEX, open interest (OI) for Bitcoin has been hovering at around $1 billion for several days, which is relatively high. In margin trading, OI refers to the total sum of long and short contracts open in the market. When OI reaches $1 billion, which typically happens after an extended rally, markets tend to see extreme volatility. 

There are other bearish signs as well. Greenspan emphasized that throughout the price upsurge, on-chain activity on the Bitcoin blockchain has not significantly increased. This suggests that the price has not been increasing in tandem with fundamentals.

Blockchain.com, which tracks all on-chain data on the Bitcoin blockchain network, showed that unique addresses and transactions per day have not increased throughout the past eight months.

The sluggish growth of these fundamentals in comparison to Bitcoin’s price has led commentators like CNBC contributor Brian Kelly to say the rally may not be sustainable.

“Activity on the Bitcoin blockchain hasn't seen any noticeable uptick either. In fact, it's been rather constant throughout this bull run,” Greenspan said.

Another possible reason for low options volume: Bakkt itself

On some days of the month, like on January 7 and January 14, Bakkt recorded $40.8 million and $28.8 million in daily volume respectively. This is according to Bakkt Volume Bot, an automated system that follows official trading activity on Bakkt, which is shown publicly by the exchange.


For a strictly regulated platform that targets institutional investors rather than retail traders, such a figure might be considered high. But there’s no question that a daily volume of less than $100 million is low in comparison to major cryptocurrency exchanges like Coinbase and Binance.

The question is: how much of this has to do with Bakkt specifically? It remains unclear whether Bakkt’s options market saw low volume because it has been fewer than two months since it opened, or if existing options platforms in the cryptocurrency market are simply more appealing than Bakkt.

Skew released a total Bitcoin options open interest chart on January 21. It compared OI across all major options exchanges including Deribit, OKEx, Bakkt, CME, and LedgerX.

Skew found that Deribit accounts for $472 million out of $554.6 million in OI, dwarfing both CME and Bakkt.

Even though Bakkt options were launched on December 9, 2019, and CME launched its options contracts on January 13 of this year, Bakkt recorded less than 2% of the daily volume of CME.

Considering the OI across all major options exchanges, it could be that Bakkt’s options market is simply recording lower volumes than other platforms despite significant volatility in the market. The futures market is becoming more saturated, and it remains unclear if Bakkt has what it takes to compete. 

Will Wall Street volume decrease after monthly close?

Apart from CME, institutional platforms are seeing low volume in spite of the imminent closure of Bitcoin’s monthly candle on the price charts. The monthly close of the dominant cryptocurrency coincides with January futures expiry on CME. Futures expiration is when futures contracts are closed on a monthly basis and investors need to make adjustments on their positions.

Futures expiration amidst heightened prices and OI on leading margin trading platforms have historically led to extreme volatility at the beginning of the month. 

The expiration of futures do not necessarily indicate a bullish or bearish trend in the market. It normally tends to lead traders to adjust their positions. “Don’t let the guard down with futures expiry coming. Prepare for the unexpected,” said cryptocurrency trader Jacob Canfield.

But overall, the upsurge of Bitcoin, predominantly led by retail traders and margin trading platforms, is raising questions about whether the January rally can last much longer.

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