With a current market capitalization of $186 billion, Bitcoin dominates the crypto market. Compared to large companies, national currencies or gold, however, the largest cryptocurrency is still one of the smaller players. A study published on June 2nd, by Coinmetrics, now shows that the Bitcoin volume has increased significantly.
The daily trading volume has increased significantly and Bitcoin is becoming increasingly popular as a trading asset. Is BTC in its current state already ready for the money of institutional investors?
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Bitcoin price quoted again above $10,000
On June 2nd, Bitcoin price surprised with a jump above the $10,000 mark. The study published by Coinmetrics now takes a look at the daily trading volume of the largest cryptocurrency.
It is not easy to determine this metric. One of the biggest challenges here is the lack of transparency of stock exchanges and the countless trading places where Bitcoin can be traded.
“The fragmentation of Bitcoin’s trading volume prevents a straightforward recording of market size,” it is written in the Coinmetrics Report.
From the perspective of institutional investors this already represents a major hurdle. That is because investors must first conduct an empirical study of the ecosystem and determine which trading venues and exchanges they consider suitable for their own needs.
Bitcoin volume depending on the markets
The derivatives market generates the largest volume. Even if this sounds negative (or at least inhibiting) at first, there are enough positive signs for Bitcoin. The following statement from the Coinmetrics report underlines this perfectly:
“Bitcoin’s trading volume is growing exponentially and if the trend continues, it will soon reach the level of major asset classes.” A time horizon of about 3-5 years is given here.
Institutions can generate $5 million a day
The average daily trading volume of the US dollar markets for Bitcoin is $0.5 billion. Accordingly, that means €500 million. Since institutional investors (unless they transact futures) use US dollars, this figure is also a good indication for them. After all, the question can be how much money can be invested in Bitcoin on a daily basis.
The report stated that institutional investors could invest around 1 percent, or $5 million per day, in Bitcoin at current trading volumes.
The buying side would most likely not want to invest more than 1% of the daily trading volume. Accordingly, they can currently inject $5 million per day of fresh money into the market without exceeding this limit.
Consequently, with the current growth in volume, Bitcoin is getting ready for institutional investors. The parallel sharp increase in volumes in the derivatives market shows that trading in futures has been relevant and interesting for big investments for some time now.
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