Bitcoin still outperforms leading traditional assets
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Bitcoin (BTC) continues to outperform traditional investment assets this year.
The digital asset, now worth $377bn, has gained 30 per cent year-to-date (YTD). It achieved this despite prices crashing in March due to the global economic crisis.
Neither the S&P ASX200 (XJO) or the S&P ASX Small Ordinaries (XSO) have managed to recover their pre-pandemic positions.
Gold has been the best performing traditional asset with a YTD gain of more than 16 per cent. In times of economic uncertainty, investors move their funds to safe havens such as gold.
Source: BTC Markets
Of the assets listed above, oil has performed the worst. As the world ground to a halt, demand for oil plummeted. Consequently, WTI oil futures prices went negative for the first time in history in April.
Bitcoin (BTC) options markets experienced the largest expiry event in the digital asset’s history last week.
On the June 26, about $1.5bn worth of BTC options contracts expired.
These contracts give traders the right to buy or sell an asset at a set price and time in the future. The below chart shows the sharp drop in funds in BTC options markets as the June contracts lapsed.
As options are the right to buy or sell, not the obligation, traders can let contracts lapse. They use options as a hedge against markets moving in an unfavourable direction to their other investments.
BTC’s market value was unaffected when the options expired on the June 26.
Options account for 1 per cent of total BTC derivative volume, according to research from digital-asset exchange Luno. Therefore, activity on these markets don’t affect BTC’s price directly.
BTC futures contracts are more significant. A contributing factor to BTC’s price crash in 2018 was short trades on the asset’s futures markets.
Institutional investors were able to short BTC on exchanges such as the Chicago Mercantile Exchange (CME).
CME’s current BTC futures contracts expire on August 3.
Open interest on this market now sits at $US382m ($550.7m). How this will affect BTC’s price remains unclear for now. However, if open interest continues to mount, it could influence BTC’s spot market value.