ZUBR, a digital asset derivatives exchange, says more regulation is vital for institutional buy-in of Bitcoin derivatives.

Launched in March (2020), ZUBR has received an in-principal approval for its DLT Provider licence in Gibraltar.

ZUBR says it analyzed regulated exchanges such as CME and Bakkt, as well as unregulated exchanges, and identified some key differences in trading personas, including: investment intent, behaviors, and market movements during both bull and bear markets. ZUBR reports that it compared the amount of open interest to trading volumes to ascertain differences. Their research suggests that institutional traders on regulated platforms look at the longer-term investment case of Bitcoin, indicated by an increase in the ‘open interest’ to volume ratio (meaning there was more ‘open interest’ compared to volumes). Retail platforms have remained relatively flat year-on-year and close positions much faster on a wide-scale, says the exchange.

ZUBR adds that its research also shows that institutional traders are moving towards holding physical Bitcoin rather than cash-settled futures. On Bakkt, at the start of the year, cash-settled futures accounted for more than 50% of Bakkt’s total traded volume. But by August, physically-settled futures accounted for 72%.

Ilgar Alekperov, CEO of ZUBR, commented:

“We believe that suitable regulation across all trading venues is essential for the Bitcoin market to fully mature. The unregulated retail space is plagued with dangerous marketing tactics such as high leverage and maker rebates which ultimately leaves traders at a severe disadvantage. It’s clear that there is increased demand from institutions such as banks and hedge funds to execute on regulated exchanges. A fully regulated marketplace keeps both institutions and retail investors safe, as well as push venues to provide an effective and consistent service.”

ZUBR reports:

  • Bitcoin futures trading volumes hit over $4 trillion in the past year. However, most notable is the growth coming from institutional investors on CME and Bakkt, the only two venues that saw an increase in trading volume after May’s all-time-high.
  • Open-interest on CME and other regulated exchanges has remained consistently higher in comparison to their traded volumes. This indicates that traders on these venues are increasingly looking at the long-term outlook and aren’t very easily swayed by large increases or decreases in price.
  • The correlation of traded volumes in terms of daily percentage change is very similar to unregulated exchanges; however, they differ significantly for regulated Bitcoin products. This again confirms a long-term bias from institutional investors.
  • Physical delivery of Bitcoin is becoming more and more critical as Bakkt traders shift their focus from cash-settled futures, to holding the actual underlying asset.