Kraken’s acquisition of the UK-based cryptocurrency futures provider Crypto Facilities led the platform on a high trading volume spree, according to their latest statements.
Sui Chung, the head of indices and price products at Crypto Facilities, confirmed that the trading volume on their futures platform increased by 565% following Kraken’s $100 million acquisition. In total, the platform recorded $1 billion worth of trades in over a 30-day timeline across all its products: bitcoin, ether, litecoin, bitcoin cash, and XRP.
At the same time, Crypto Facilities noted a higher number of signups, as Kraken’s large clientele entered the futures trading platform.
The figures also served as an example of how a bruised-and-battered cryptocurrency market was recovering from the horrors of a bearish 2018.
Growing volume on an FCA-regulated crypto futures platform indicated the willingness of spot traders to explore opportunities in the crypto derivatives market.
Crypto Futures and Speculations
A rise in the number of futures trading contracts indicates the traders’ willingness to speculate on the value of the underlying asset. In the case of cryptos, the spot price market is largely unregulated, which makes futures trading a riskier alternative to potential investors.
However, Crypto Facilities relies on a regulated spot pricing index for cryptocurrencies, which also provides data to the CME CF Bitcoin Reference Rate, a US bitcoin futures offering. The move ensures that the market remains protected from price manipulation.
Therefore, when more traders start speculating on the value of cryptocurrencies via futures, it ends up reflecting their trust on the underlying spot. It does not mean that the cryptocurrencies in Crypto Facilities’ portfolio are bullish. Instead, it indicates that traders are willing to take risks on the price movements of the certain cryptocurrencies, now that they have a reliable underlying price index to begin from.
Higher Liquidity
The other reason why traders are taking an interest in Crypto Facilities’ futures offerings is liquidity, especially for the futures contracts of smaller cap coins. In his press statement, Chung noted that after Kraken’s acquisition, the liquidity for bitcoin and ether contracts increased by 200%. At the same time, the liquidity for bitcoin cash and litecoin contracts increased by 1,000%.
Futures markets are inherently liquid because they are traded in huge numbers every day. There is a constant presence of buyers and sellers that ensures quick market orders. Also, it entails that the cryptocurrency prices do not act volatile whenever the futures contracts come near their maturity.
Therefore, brokerage firms could clear large orders without leaving any adverse impact on the cryptocurrency market in concern.
All and all, the massive presence of traders in a regulated cryptocurrency futures service like Crypto Facilities points to an increasing institutionalization of the crypto markets. The volume speaks a lot.
