Derivative products, such as options contracts — financial tools that provide investors the right, but not the obligation, to purchase or sell an asset at a specified price — are projected to boost the Bitcoin (BTC) market capitalization to at least $10 trillion, as stated by market analyst James Van Straten.
Van Straten noted that options and other derivatives entice institutional investors and help stabilize markets against the high volatility typical of digital assets.
He highlighted the open interest for BTC futures on the Chicago Mercantile Exchange (CME), the largest derivatives marketplace globally, as proof of a transformation. Van Straten wrote:
“CME options open interest has reached an all-time high, partly due to systematic volatility selling strategies like covered calls. This indicates a more developed market structure with enhanced derivatives liquidity surrounding Bitcoin.”
Reduced volatility affects both sides, and the significant downturns common in crypto markets will also temper the spectacular gains traders have come to expect, Van Straten added.
Market analysts are still debating the impact of financial derivative products and investment vehicles on the Bitcoin market cycle and the larger crypto landscape, with some asserting that all indicators suggest market maturation, while others claim that investor psychology is the true driving force behind market movements.
Related: Bitcoin’s ‘biggest bull catalyst’ may be the next Fed chair pick: Novogratz
Is the four-year market cycle dead?
Analysts remain split on the influence that institutional investors, investment vehicles, and financial derivatives exert on crypto markets.
Seamus Rocca, CEO of financial services firm Xapo Bank, told Cointelegraph that Bitcoin’s four-year market cycle is not over, and markets will continue to be shaped by news cycles, crowd sentiment, and investor psychology.
“Many people are saying, ‘Oh, the institutions are here, and consequently, the cyclical nature of Bitcoin is finished.’ I’m not quite convinced of that,” Rocca stated.
Bitcoin supporter and market analyst Matthew Kratter asserted that human psychology is the real driving force behind market movements, arguing that institutional investors can be just as irrational as retail participants.
“The most recent Bitcoin bear market from 2021 to 2022 was largely triggered by institutional investors making poor decisions at firms like Grayscale, Genesis, Three Arrows Capital, and FTX,” Kratter noted.
Magazine: Crypto traders ‘fool themselves’ with price predictions: Peter Brandt
