What do milestones mean in the derivatives market?

The prospect of Bitcoin (BTC) rising to the $100,000 price level has captivated investors for years. Retail participants often celebrate these psychological milestones, but the main impact comes from the institutional adoption and development of the Bitcoin derivatives market.

Current Bitcoin futures open interest totals 626,520 BTC ($58 billion), a 15% increase in two months, indicating growing interest in derivatives. If Bitcoin reaches $100,000, this open interest will reach $62.5 billion, or 3.1% of the $2 trillion market capitalization. This contrasts with the S&P 500, which has $817 billion in futures open interest, or just 1.9% of its $43 trillion market capitalization.

Since over 65% of cryptocurrency trading occurs on cryptocurrency-specific exchanges such as Binance, OKX, and Deribit, it is unfair to directly compare Bitcoin and S&P 500 futures. This number is expected to decline as spot Bitcoin exchange-traded funds (ETFs) eventually launch their own futures markets, particularly those offering spot creation that will appeal to institutional investors.

However, regulation alone does not guarantee adoption. For example, CBOE offered Bitcoin futures from December 2017 to March 2019, but discontinued the product due to low demand. The recent approval of spot Bitcoin ETF options signals progress but highlights the need for deeper integration with existing financial markets.

Institutional Adoption: Your Key to $100,000 and More

Institutional adoption is important to translate Bitcoin’s $100,000 milestone into meaningful derivatives market growth. For example, spot ETF options can enable complex strategies such as generating income through covered calls or hedging liquidity risk. As institutions become more comfortable using Bitcoin as a reserve asset, derivatives markets are likely to evolve to accommodate their sophisticated needs.

The futures market can often be confusing to new investors, especially when it comes to short positions. Many people assume that these positions indicate a downtrend, but this is not always the case. Strategies such as cash and carry, where investors hold physical Bitcoin while selling futures to secure risk-free profits, create large quantities of short-term contracts. These strategies stabilize the market rather than betting on price declines.

A potential game-changing catalyst for a Bitcoin price surge could come from changes in corporate governance. Microsoft shareholders recently voted to allocate funds to Bitcoin, signaling significant intentions from influential investors. Even if the plan is not approved or ignored by the board in 2025, the mere act of voting on Bitcoin allocation creates momentum that can pressure other companies to follow suit.

Additionally, Senator Cynthia Lummis’ proposal to convert U.S. Treasury gold certificates to Bitcoin and create a “strategic Bitcoin reserve” provides another price catalyst. Her bill includes a plan to hold 1 million BTC, or 5% of Bitcoin’s total supply, for 20 years, further strengthening Bitcoin’s potential as a reserve asset.

relevant: Why the US Spot Bitcoin Options Launch Is So Big

The Bitcoin derivatives market is an effect, not a cause.

Despite the excitement surrounding Bitcoin hitting $100,000, derivatives markets are more likely to react to widespread adoption rather than drive it. Retail and corporate fears of a decline in the value of fiat remain a key motivator pushing Bitcoin higher. More than any futures product or spot ETF, this psychological shift will ultimately solidify Bitcoin’s role in institutional portfolios.

Lyn Alden’s research strengthens this explanation by showing a correlation between the global M2 money supply and the price of Bitcoin. As governments accelerate monetary stimulus or cut interest rates, investors are increasingly looking to scarce assets like Bitcoin as a hedge against declines in value.

As a result, a liquid and mature derivatives market will emerge as a result, rather than a cause, of Bitcoin price innovation.