In brief

  • ZUBR has released a report showing that institutional investors want actual Bitcoin, rather than cash-settled futures.
  • Investors are also interested in holding onto Bitcoin in the long-term—and aren’t put off by the volatility.
  • In the past year, Bitcoin futures trading volumes hit over $4 trillion, according to the report.

Institutional investors are moving toward holding Bitcoin in “physical” form instead of cash-settled futures, a report from cryptocurrency derivatives exchange ZUBR says. Such investors are also undeterred by the volatility of the biggest cryptocurrency by market cap—and are thinking about holding onto the asset in the long term, the report adds. 

The report, “Institutional Investors Turn 'Hodlers' on Bitcoin Futures Markets,” published last week, concludes that institutional investors (those that invest money on behalf of others, such as hedge funds) are relying on regulated exchanges to get involved in Bitcoin derivatives.

Derivatives are tradable securities or contracts that derive their value from an underlying asset. They have frequently been used by institutional investors, and the existence of Bitcoin derivatives might help draw more of these investors to the cryptocurrency space. 

In the world of Bitcoin derivatives, “physical form” means that Bitcoin itself will be delivered to the investor—rather than a cash settlement in fiat, like dollars and euros. 

“It’s clear that there is increased demand from institutions such as banks and hedge funds to execute on regulated exchanges,” CEO ZUBR CEO, Ilgar Alekperov, said in the report. “A fully regulated marketplace keeps both institutions and retail investors safe, as well as push venues to provide an effective and consistent service.”

That’s borne out by the statistics. In the past year, Bitcoin futures trading volumes hit over $4 trillion, according to the report. The surge in interest in Bitcoin investment is mainly seen on the Chicago Mercantile Exchange (CME) and through Bakkt, a crypto derivatives company run by the Intercontinental Exchange—both have had higher trading volumes this year. 

Interest in physically-settled Bitcoin derivatives, specifically, is becoming more important, the report notes. Using Bakkt as an example, ZUBR says that at the start of the 2020, cash-settled futures accounted for over 50% of Bakkt's total traded volume. Though by August, physically-settled futures on the exchange accounted for 72%.