Bitcoin Futures Trading

Low Volumes and High Margins.

Estimates for the average value of contracts trading daily vary. Bloomberg claims the total monetary value of bitcoin futures contracts was $50.2 million while CNBC reports a notional value of $60 million being traded on each day during the first week of futures trading in bitcoin. The overall trading volume for bitcoin at trading exchanges yesterday was $11.4 billion.

At present, there are three bitcoin futures contracts being offered by CBOE. The first one expires in January 2018. It had a trading volume of 1,515 and was the most popular at the close of trading yesterday. Contracts expiring in February and March 2018 were a distant second and third, with volumes of 201 and 144 yesterday at the close of trading. For context, VIX futures contracts expiring next Wednesday, December 20, had a trading volume of 128,771.

In an interview with CNBC, Cumberland Mining’s Bobby Cho attributed low trading volumes to two reasons. The first is that bitcoin's largest traders are not residents of the U.S. That may be true, given the enthusiasm for cryptocurrency trading in Asian markets. Over the last couple of weeks, Bithumb, a South Korea-based exchange, accounts for the second-highest trading volumes in bitcoin.

Further, Cho states that bitcoin miners are not present in the U.S. and are not built to trade financial instruments. That reasoning may be flawed, especially since it can be applied to gold, which has high trading volumes, and found lacking.

The real reason for low volumes may be the absence of institutional investors, who have taken a cautious stance and are performing due diligence while watching initial price action around futures. An example of this approach is Goldman Sachs, which is a clearing agent for CBOE trades. According to reports, it is demanding as much as 100 percent in margin amounts for clearing bitcoin trades.