If you ask what is the most captivating episode in the cryptocurrency ecosystem in the recent past, then it would mostly be the story of the addition of “Bitcoin futures trading mechanism”. They seem little feeble to strike a chord so far.

Well, although the overall volumes of bitcoin futures seem to be spiking up, the underlying price seems to be doing fine just without these financial vehicles. This begs the question as to whether or not Bitcoin futures even matter when looking at the bigger picture.

The bitcoin futures curve is effectively flat and approaching backwardation.

There is an ongoing debate on how the futures curve should be calculated for bitcoin. The normal state of the markets still hasn't been determined. Bitcoin differs from many other commodities as it incurs little to no traditional storage costs. However holding bitcoin still poses a risk, since the holder could be hacked, misplace their private keys, or otherwise lose the currency. Some argue that this can be defined as a cost, particularly for those purchasers and holders who haven't installed robust security infrastructure. Those people may put a premium over having access to bitcoin exposure in the future. Consequently, they may be more willing to pay a premium for the futures price. This can create what may be perceived as a contango in prices.

Bitcoin Futures - a niche market:

Ever since the futures market were announced for Bitcoins, a lot of Bitcoin users were extremely excited and a few sets were hyperactive. Divulging institutional investors to Bitcoin’s price swings sounds very powerful. More money flowing into Bitcoin should have a positive price effect in the long run. That is what majority of the investor and trading classes have expected for, but so far, the impact is not that considerable except for.

A constructive side is that how the Bitcoin futures volume is rising. Both CME and CBOE have seen an inflow of interest in these newly invented vehicles.

More volume results in more liquidity, which shows institutional investors want to be exposed to Bitcoin. Slowly but surely, the volume for both CBOE and CME is rising.

Compared to the regular trading volume, these futures represent a minor blip. Bitcoin has a daily trading volume of around $8bn as of right now. This is excluding the OTC trading market, which has grown spectacularly these past few weeks. Futures, on the other hand, struggle to reach $750m. It isn’t necessarily the impact or changes people had hoped it would be.

The big question is how these Bitcoin futures will affect the long-term value. As we saw in late 2017, the Bitcoin price does fine on its own without such investment vehicles. Relying on a third party to invest in Bitcoin is always counterproductive. Cryptocurrency is all about being in control of your own money or investment. Futures contracts are the complete opposite in this regard.

Recent positive Bitcoin price momentum has become visible across all exchanges. This has seemingly little to do with the increase in futures trading volume. Cryptocurrency sees a bearish cycle quite regularly before new all-time highs are reached. With the futures launching near the most recent all-time high, it seems they have had an adverse price effect so far. That situation can still change in the coming months and years.

None of this means Bitcoin futures doesn’t seem constructive count. It would be wise to foresee the broader image. These instruments have not equated expectations of Bitcoin speculators so far. Simultaneously, the instruments are only accessible for just shorter tenors (i.e. five months). The remainder of this year will be quite telling for both investment vehicles and the Bitcoin price alike. What the final tally will be on December 31st, remains to be determined.

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