Bitcoin Futures Fail To Live Up To The Hype

After the first week I gave the CBOE's Bitcoin Futures contract a grade of C- (link)

That contract has been trading for 3 weeks and the CME's contract has now been trading for 2 weeks and I think my initial grade may have been generous.

Open interest in the two contracts is really disappointing to me. The January CBOE contract has open interest of 2,828 contracts as of December 29th. That open interest has barely risen from where it ended its first week (1,730 contracts). The CME's contract has finished its first two weeks with open interest of only 498 contracts. Given the amount of hype surrounding bitcoin and how this product would promote new access - the numbers seem very low. I cannot remember a futures contract that launched with more awareness than these contracts, yet they aren't able to generate significant open interest.

Trading volumes also seem low to me. Some of that can be explained by last week being a holiday week across much of the Western world - but I wouldn't have expected something as global as bitcoin to succumb as much as it did. Average trading volume on the front contract on the CBOE has been 932 contracts. The CME's has been a slightly more robust 3,387 daily trades.

What should concern Bitcoin Bulls the most is that most of that volume occurred on December 22nd - a bad day for Bitcoin. On the CME, Bitcoin started the day above $15,500 and plummeted to a low of $12,265. Bitcoin itself, according to Bloomberg 'flash crashed' to a low of $10,775 on that day and the CBOE contract traded to $11,300 - extreme divergence. The CME exhibited a 'normal' volume acceleration on a down day. It had 12,554 Jan. contracts trade that day while the CBOT 2,374 Jan. contracts trade that day - triple and double the average volume, respectively.

These contracts and the asset class itself behave like any normal overbought asset - hardly encouraging for future price action.

It is also failing to follow the recent pattern of rising after the weekend - indicating to me, that the buying interest at these prices is running out.