- As crypto market dynamics continue to evolve, a recent development has caught attention: the paper Bitcoin (BTC) trading volume overshadowing real BTC transactions.
- Bitcoin has a passionate decentralized fanbase determined to reshape the financial world.
- The direction of the spot market is heavily influenced by the futures market, signaling a delay in the introduction of spot ETFs.
The futures market in Bitcoin may be a factor delaying the launch of spot Bitcoin ETFs; Why are Bitcoin futures so important?
The Power of the Bitcoin Futures Market
As crypto market dynamics continue to evolve, a recent development has caught attention: the paper Bitcoin (BTC) trading volume overshadowing real BTC transactions. This dynamic involving Bitcoin futures contracts has deep implications for the cryptocurrency’s price. It also sheds light on the ongoing delays in introducing spot ETFs.
Historically, most gold reserves were held tightly in vaults, making them nearly untraceable. In contrast, Bitcoin has a passionate decentralized fanbase determined to reshape the financial world. However, the power dynamics between real BTC (spot market) and paper BTC (futures market) are causing fluctuations in the crypto community.
In the past, most gold reserves sat in virtually unmonitored vaults, while derivatives were easily delivered to the masses. As a result, the value of gold was often manipulated by these big players. But launching such derivatives on Bitcoin, which is fiercely protected by its community, is a different ballgame.
According to recent data from Glassnode, there are currently approximately 2.3 million BTC on exchanges. In a hypothetical scenario, if the public were to attempt to buy all of these assets and typically use 5x leverage to halt upward price momentum, only $12 billion worth of futures contracts would be needed.
Why Are Spot ETFs Lagging?
This figure should be more meaningful in the context of the banking system’s $20 trillion M2 money supply. Therefore, there is an incentive to profit from selling BTC futures contracts to lower the price for an asset worth $12 billion.
Furthermore, the daily trading volume of futures markets has significantly increased, surpassing that of the spot market. Consequently, the direction of the spot market is heavily influenced by the futures market, signaling a delay in the introduction of spot ETFs.
Interestingly, some argue that futures contracts can affect the BTC spot price in both directions, but a decrease in liquid BTC would only push the price upwards. Significantly, as soon as futures markets began trading, Bitcoin started to resemble skyrocketing price increases.
The rivalry between the futures and spot markets could reshape the Bitcoin landscape. Understanding these mechanics is important for investors and enthusiasts as they navigate this complex territory in the crypto community.
