Historically, cryptocurrency markets have been dominated by unregulated trading venues and retail investor activity. Still, this year shows how much market structure and participation has evolved and become institutionalized, Goldman Sachs (GS) said in a report last week.
The crypto market saw a growth of regulated, centrally-cleared derivatives venues in 2023, including Coinbase Derivatives, CBOE, Eurex, GFO-X, AsiaNext and 24 Exchange, the bank observed.
“The institutionalization of the market was most evident in the derivatives market,” the report said, adding that “CME saw a consistent increase in bitcoin (BTC) and ether (ETH) futures and options trading, and in Q4 has become the top BTC futures exchange by open interest.”
Goldman notes that bitcoin and ether open interest was flat for the first nine months of the year; however, “October price action brought along interest from institutional investors, who took the opportunity to position themselves for a potential spot BTC ETF approval and/or hedge exposure via derivatives.”
Bitcoin’s open interest surged to over $4 billion in the fourth quarter. Open interest is the total number of outstanding derivative contracts held by investors and represents active positions.
Ether futures trading continued to lag throughout the year, with volumes making up around 20%-50% of the bitcoin futures market, the note said.
The expectation for the approval of a spot bitcoin ETF was also reflected in inflows into existing exchange-traded products (ETPs) and futures ETFs, which saw total net inflows of $1.9 billion in the last quarter of the year, the report added.
Read more: JPMorgan Is Cautious About Crypto Markets Into 2024
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