Even $1 billion worth of trading in crypto futures hasn’t affected the price of bitcoin much. Behaving against the general perception of the prices changing after the market being overbought, the 500% increase in Crypto Facilities’ futures trading didn’t lead the market into a bull run.
Kraken’s acquisition of Crypto Facilities is considered to be one of the biggest acquisition in this space. The success of the acquisition is marked by the fact that almost $1 billion in crypto futures have been traded over the platform in the last month. The exchange’s acquisition sure brought crypto futures trading to the mainstream, but surprisingly, this huge cash inflow hasn’t much-affected bitcoin’s price.
Last month, Kraken acquired the UK based Crypto Facilities, a trading platform that allowed trading of crypto futures. The CEO of Kraken himself was excited to welcome the team of Crypto Facilities to Kraken and believed that this would open new ventures for crypto. He stated in his blog post,
I’m thrilled to welcome the Crypto Facilities team into the Kraken family. We are excited to introduce eligible clients to these industry leading futures and index products. Over the coming months, our teams will continue to enhance and expand these offerings. We’ve got great stuff in store for traders and institutional clients in 2019.
This is one of the biggest contributions in bringing future trading to crypto. Since the acquisition, the crypto futures trading of Crypto Facilities has almost increased to 500%, bringing in huge amounts of money in the crypto space. Even with trading volumes this high, the crypto valuations haven’t much changed.
The graph above shows the behavior of Bitcoin over the past month, no significant growth has been observed, which normally would’ve been expected from such trading volumes and cash inflows.
$1 billion can easily be considered as an amount equivalent to institutional investment. If this amount doesn’t affect the price of bitcoin, it changes a lot for crypto in terms of expectations of the investors and experts. The general notion exists that with the approval of the ETF (Exchange traded fund) proposal, or with regulations, these institutional investments would slide into the crypto space, which would naturally trigger a boost in the price and a bull run resultantly, but this time, the facts state otherwise. The huge amount of money converted to digital money would put the market into an overbought situation where the price naturally increases.
The positive effect for Kraken, however, in terms of revenue is huge. Crypto Facilities has mentioned the trading fee on their website.
The overall trading fee turns out to near 0.45% on average, and when multiplied by a billion dollars, the amount becomes $4.5 million in revenue. This also marks the huge success of the acquisition.
The aforementioned statistics of bitcoin prices and the amount of crypto futures traded, it can be inferred that the institutional investments might not be the only savior for crypto. Adoption is considered to be the need of the hour and the startups, exchanges, institutions, and influencers are working to bring crypto to the mainstream. Better use cases are being introduced and the demand for the ETF is increasing which would naturally affect the number of retail investors in the crypto space. Moreover, the use cases are being increased to eliminate the status of digital gold for bitcoin and instead be used as a digital currency.
Factors like regulations (whether or not they should take place s a separate debate) are considered important for actually affecting the price of cryptos. Scalability is another factor, if crypto is able to provide a platform that evens the tps (Transactions per second) provided by VISA and Mastercard, people would definitely storm towards the crypto space due to the added transparent and decentralized functionality.
Addition of specific use cases, rather than general would also trigger adoption which is again, the primary fundamental of cryptos. These use cases can be enhanced by bringing in private blockchains that solve issues for institutions so that they can contribute to the crypto/blockchain space too. We can’t totally rule out institutional investment from the equation because although this one time it didn’t yield the expected results, but the crypto space is in its infancy and the experiments are ongoing.