The World’s Most Liquid Futures Markets and How Crypto Futures Fit in
Cryptocurrencies are well on their way to becoming a sixth asset class. The other five asset classes include stocks, bonds, commodities, cash, and alternative investments. In this article, we’ll take a look at the world’s most liquid futures markets–and how crypto futures fit in.
Futures Markets Have Come a Long Way
Organized futures trading dates back to April 3, 1848, when the Chicago Board of Trade (CBOT) was officially launched. Since then, futures markets have changed dramatically, particularly in terms of different financial instruments that are represented on the futures exchanges.
These days, each of the five major asset classes is available for trading as futures contracts on the various futures exchanges. However, cryptocurrencies became a tradable futures contract in December 2017, when the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) launched a regulated Bitcoin futures contract.
Why has futures trading experienced such explosive growth during the past two decades and, more importantly, will the expansion continue? Let’s review the details.
Futures Markets Volume Continues to Increase
In 2017, according to the Futures Industry Association (FIA), total global futures value achieved a record high of $33.6 trillion. This was expected to increase in 2018, and the official figures for last year will be released in March, 2019.
When the CBOT launched its futures exchange in 1848, the vast majority of traders were comprised of hedgers trying to limit the price risk of their agriculture products.
However, in the 1970s, speculators began to dominate the futures markets, as several financial futures, interest rate futures, energy futures, and currency futures entered the trading landscape.
Additionally, the global economy was becoming more technology-based and industrialized. The agriculture industry represented a much smaller percentage of economic output. All these factors caused futures trading volume to increase sharply.
Over the course of the past decade, global futures volume increased by 66.01%. The futures industry is one of the top performing sectors within the global financial universe. Why?
Because the industry is constantly adding innovative trading products to its list of tradable futures contracts. Global futures volume will literally explode as cryptocurrency trading continues to increase over the course of the next decade.
Global Futures Volume in Numbers
Please review the increase in trading volume during the past 10 years based on data obtained from the Futures Industry Association. Note: Annual volume is displayed in billions of contracts.
· 2017 Global Futures Volume – 25.20
· 2016 Global Futures Volume – 25.22
· 2015 Global Futures Volume – 24.78
· 2014 Global Futures Volume – 21.87
· 2013 Global Futures Volume – 21.55
· 2012 Global Futures Volume – 21.20
· 2011 Global Futures Volume – 24.99
· 2010 Global Futures Volume – 22.30
· 2009 Global Futures Volume – 17.70
· 2008 Global Futures Volume – 17.67
· 2007 Global Futures Volume – 15.18
Now let’s review a list of the most liquid futures contracts below.
Based on data by the Futures Industry Association, equity index futures are the most popularly traded contracts, followed by single stock futures (SSF) and interest rates.
In terms of individual contracts, the e-mini S&P 500 index is the most heavily traded contract. Other popular contracts include Eurodollars, crude oil, Euro FX and gold.
Are Cryptocurrencies Destined To Become a Volume Leader in the Futures Industry?
Cryptocurrency futures trading has only been in existence a few years. But so far, these investment vehicles have been very popular within the trading community.
In terms of Bitcoin spot trading combined with futures trading, volume has literally exploded during the past few years. Please review the following information.
· 2015 Bitcoin Notional Trading Volume – $12 billion
· 2016 Bitcoin Notional Trading Volume – $31 billion
· 2017 Bitcoin Notional Trading Volume – $870 billion
· 2018 Bitcoin Notional Trading Volume – $2,204 billion
These numbers are absolutely incredible. Based on data provided by Satoshi Capital Research:
Bitcoin notional trading volume has increased 18,266% since 2015!
Bitcoin suffered one of its worst bears markets of all-time in 2018. However, trading volume increased 153% in comparison to 2017. These numbers clearly verify that demand for cryptocurrency futures is stronger than ever.
Remember, the notional value of all global futures trading in 2017 was $33.6 trillion.
In 2018, Bitcoin’s notional volume was $2.2 trillion.
These numbers are truly remarkable when we consider that cryptocurrencies have only been in existence for 10 years.
Additionally, the notional volume only takes into account Bitcoin futures trading. It does not include other crypto futures trading.
Based on these volume figures, a strong argument could be made that cryptocurrency futures contracts will soon be listed as one of the leaders among all actively traded futures contracts. The demand for crypto trading continues to grow at an exponential pace.
Digitex Finds Itself in a “Sweet Spot”
Without question, Digitex is entering the cryptocurrency futures markets at precisely the right time. Despite the nasty bear market in 2018, crypto trading volume continues to increase. More importantly, Digitex is launching a revolutionary commission-free trading exchange.
In addition to cryptocurrency futures contracts, Digitex is exploring the idea of adding several other commodity futures markets to its platform. The list includes traditional markets such as gold, crude oil, single stock futures (SSF), and stock indices.
By offering traditional products, Digitex will be competing with the largest futures exchanges in the world. The major difference is that Digitex will provide its customers with a zero-fee futures exchange!
For the first time since 1848, traditional futures exchanges finally have some competition.
Full Disclosure: I own DGTX.
Digitex Futures writers and/or guest authors may or may not have a vested interest in the Digitex Futures project and/or other businesses mentioned throughout the site. None of the content on Digitex Futures is investment advice nor is it a replacement for advice from a certified financial planner.