Are Bakkt’s bitcoin futures reacting to the financial market difficulties caused by the Coronavirus?
Taking the Dow Jones index from the New York Stock Exchange as a reference, it is possible to note that, after an initial significant drop at the end of January, when news began to spread about the spreading of the contagion in China, the index had soon returned to its highs, by mid-February, and then literally collapsed in the last few days.
The current level is at the lowest point of 2019.
The trading volume of Bakkt futures contracts seems to have followed the opposite trend.
Thursday's Bakkt Bitcoin Monthly Futures:
📉 Traded contracts: 2163 ($19.34 million, -35%)
🚀 All time high: 6601 (12/18/2019)
💰 Open interest: $11.88 million (+5%)
— Bakkt Volume Bot (@BakktBot) February 28, 2020
At the end of January, it had a couple of peaks, on the 27th and 30th, followed by a similar peak in mid-February, to reach the record of 2020 on February 26th with $29.3 million.
Open interest, on the other hand, had a slightly different trend, because at the end of January it was below or around 10 million, and then rose to 18 in mid-February and back around 11 in the last few days.
When comparing the charts there does not seem to be a correlation between the movements of the Dow Jones and those of the open interest of Bakkt futures, while there is some more correspondence, albeit in reverse, with the difficulties of the Dow Jones and those moments of euphoria for the trading volumes of Bakkt contracts.
In fact, in mid-February, both the Dow Jones index and Bakkt volumes were sustained, but at the end of January and, in recent days, the Bakkt futures have responded to a significant drop in Dow Jones with a surge in volumes, with numbers in line with those of mid-February.
The fact that the two moments of weakness of the Dow Jones are due to market concerns about the possible economic consequences of the Coronavirus seems to be evident, but it is more difficult to find a connection between the news about the virus and the trading volumes of Bakkt contracts.
However, in the days of the biggest drop in the Dow Jones index, between the end of January and today, Bakkt futures trading volumes were sustained, coinciding with the publication of the worst news about the spread of the virus and its possible impact on the economy.
These are hardly coincidences, and although they refer to only two specific moments, the end of January and the end of February 2020, they suggest that the Coronavirus is having an impact not only on stock indices but also on the exchange of bitcoin futures.
Finally, it should be noted that these similarities have not occurred for the CME bitcoin futures on the Chicago Stock Exchange, perhaps because they are settled in dollars and not in bitcoin like those of Bakkt.
Indeed, in recent days the trading volumes of CME bitcoin futures have decreased compared to those of mid-month, revealing that there is no correspondence between them and the news about the Coronavirus.