The way to increase liquidity for Bitcoin is to have more transactions on chain.
Mirco Romanato
1

Mirco: Bitcoin has different properties and use cases, but not every property is equally important or valued for every single use case — in fact, some properties may actually present a disadvantage for a particular application.

As with any asset class, financial or otherwise, trading/speculation plays an important role in the Bitcoin market, as it provides liquidity, reflects new information, signals aggregate market expectations, etc., all of which support the greater ecosystem and “real” Bitcoin applications such as (say) cheap international remittances.

Most Bitcoin traders are therefore only interested in the price of Bitcoin, not the pseudonymous and distributed nature of its clearing. This makes it an ideal candidate for derivatives trading, since speculative buyers and sellers can simply trade a derivative between themselves that references the underlying Bitcoin price, without needing to transact in underlying Bitcoin at all. Note that in practice there will be some spillover into the spot market due to arbitrage activity, but in time the volume and open interest associated with the Bitcoin derivatives market should be significantly more than that of the underlying spot market.

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