JPMorgan Analysts: Significance of Bitcoin Futures Is Ignored

Bitcoin Futures Trading on Crypto Exchanges

Bitcoin futures are becoming popular and as trading them is turning to be more prevalent, regulators have naturally started to pay them more attention. Many traditional or crypto exchanges have started offering the possibility of trading Bitcoin futures, and even began introducing indices that keep investors and individuals up with real-time Bitcoin price, traded volume and much more.

Recently, one of the largest banking companies worldwide, JPMorgan Chase, said that ‘Bitcoin futures may be more important than many in the market appreciate.’ Two important financial entities – the cryptocurrency asset manager Bitwise and the research group Blockchain Transparency Institute – have also published several studies and stats related to support the postulation that Bitcoin futures do earn increasingly growing importance.

The reports indicate that only five percent of the total Bitcoin futures trading is authentic. The total Bitcoin futures trading volume in May was around $720 billion, which means that if only 5% of that the actual volume of monthly Bitcoin trading on cryptocurrency exchanges was around $36 billion. The data has been published by JPMorgan strategists led by Nikolaos Panigirtzoglou who used data from Coinmarketcap. The Chicago-based exchange company Cboe Global Markets and CME Group have recorded combine Bitcoin future trading volume of $12 billion which according to JPMorgan ‘jump from April’s $5.5 billion and a first-quarter 2019 monthly average of $1.8 billion.’

According to Panigirtzoglou, there is a major implication to it:

“[T]he importance of the listed futures market has been significantly understated. The report by Bitwise credits the traded futures as an important development in allowing short exposures that enabled arbitrageurs in properly engaging in arbitrage, and that the futures share of spot Bitcoin volumes increased sharply in April/May.”

How Fake Inflated Crypto Exchanges’ Volumes Downplay the Significance of Bitcoin Futures

Crypto asset manager Bitwise filed a report in March with the Securities and Exchange Commission (SEC), indicating that some crypto exchanges inflate their trading volumes to appear higher in rankings in popular crypto sites such as CoinMarketCap, which can attract more users and generate fees. One of the biggest cryptocurrency market data aggregators said at the time that concerns over inaccuracies “are valid,” and thus confirming Bitwise’s claim.

JPMorgan said:

“The overstatement of trading volumes by cryptocurrency exchanges, and by implication the understatement of the importance of listed futures, suggests that market structure has likely changed considerably since the previous spike in Bitcoin prices in end-2017 with a greater influence from institutional investors.”

If so, it is quite clear that the cryptocurrency market structure indeed altered tremendously and Bitcoin futures’ volume share out of the total is up sharply also; these are indications that the significance of Bitcoin futures is rising.

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