According to market analyst James Van Straten, derivatives products like options contracts—financial instruments that grant investors the right, but not the obligation, to buy or sell an asset at a set price—are poised to propel Bitcoin (BTC) market capitalization to a minimum of $10 trillion.
Van Straten noted that options and other derivatives draw in institutional investors and help stabilize markets against the pronounced volatility characteristic of digital assets.
He pointed to the increasing open interest for BTC futures on the Chicago Mercantile Exchange (CME)—the world’s largest derivatives market—as a sign of change. Van Straten stated:
“CME options open interest is at an all-time high, partly fueled by systematic volatility selling strategies like covered calls. This indicates a more mature market structure with enhanced derivatives liquidity surrounding Bitcoin.”
While reduced volatility can have its benefits, Van Straten cautioned that the dramatic downturns typical of crypto markets may also diminish the extraordinary gains that traders have grown used to.
Market analysts continue to explore the implications of financial derivative products and investment vehicles on the Bitcoin market cycle and the wider crypto landscape. Some suggest that these developments indicate market maturation, while others contend that investor psychology remains the fundamental driver behind market movements.
Related: The next Fed chair selection may serve as Bitcoin’s ‘biggest bull catalyst’: Novogratz
Is the four-year market cycle over?
Analysts are split regarding the influence of institutional investors, investment products, and financial derivatives on crypto markets.
Seamus Rocca, the CEO of financial services firm Xapo Bank, shared with Cointelegraph that he believes Bitcoin’s four-year market cycle is still intact, asserting that market movements will continue to be shaped by news cycles, crowd sentiment, and investor psychology.
“Many are declaring that with institutions entering the scene, the cyclical nature of Bitcoin is over. I’m not fully convinced of that,” Rocca remarked.
Bitcoin supporter and market analyst Matthew Kratter asserted that human psychology fundamentally influences market dynamics, claiming that institutional investors can be just as irrational as retail traders.
“The recent Bitcoin bear market from 2021 to 2022 was largely driven by institutional failures at firms like Grayscale, Genesis, Three Arrows Capital, and FTX,” Kratter elaborated.
Magazine: Crypto traders often mislead themselves with price forecasts: Peter Brandt
