Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Trading in crypto derivatives surges as investors hedge positions after FTX shock

Published 11/10/2022, 01:23 PM
Updated 11/10/2022, 01:26 PM
© Reuters. FILE PHOTO: A representation of bitcoin is seen in front of a stock graph in this illustration taken May 19, 2021. REUTERS/Dado Ruvic/Illustration/File Photo
BTC/USD
-

By Medha Singh and Lisa Pauline Mattackal

(Reuters) - Trading volumes in bitcoin futures and exchange traded funds (ETFs) has exploded as investors scrambled to hedge their positions after this week's slump in digital tokens triggered by turmoil at crypto exchange FTX.

CME bitcoin futures November contracts traded at $17,250, with a volume of 13,292 at 11:24 a.m. EST (1624 GMT), which was a 3% discount to the spot price of $17,770.

Trading volumes soared on Tuesday and Wednesday as FTX's woes worsened, touching 48,554 and 32,168 contracts respectively, significantly higher than volumes over the past two months which hovered between 4,902 and 27,309.

Bitcoin bounced 10% on Thursday after touching a late-2020 low earlier in the day as largest crypto exchange Binance walked away from a bailout of FTX, leaving the firm's urgent push to plug a reported $8 billion hole in its finances.

The ProShares short bitcoin strategy ETF, a bearish play on CME bitcoin futures, witnessed record trading volume on Wednesday as investors hunted for "regulated, transparent futures market," ProShares Global Investment Strategist Simeon Hyman said.

"This suggests an overwhelmingly strong unison desire to hedge, with shorts being the predominant force of leveraged exposure at the moment," said Vetle Lunde, analyst at Norway-based crypto research firm Arcane Research.

Meanwhile, ProShares Bitcoin Strategy ETF, which was halted for trading on Wednesday, has witnessed a 300% jump in trading volume in the from its previous high on October 21, 2022.

Assets under management for the BITO fund has shrunk by almost a third since its launch nearly a year ago to about $500 million, according to Refinitiv Lipper data.

Funding rates that represent sentiment in the perpetual swaps market, a major part of the bitcoin derivatives world, were negative 0.0219% on Thursday, according to Coinglass, trading near levels last seen in March 2020, Arcane Research's Lunde said.

Negative funding rates imply sentiment is bearish as investors must pay to hold a short position.

© Reuters. FILE PHOTO: A representation of bitcoin is seen in front of a stock graph in this illustration taken May 19, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

Some market participants reported facing issues with borrowing and shorting cryptocurrencies.

"We've traded some spot in the last few days and trading desks are being very conservative with risk management right now so it wouldn't surprise me that futures markets are getting a bit tricky to navigate," said Greg King, chief executive officer at Osprey Funds.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.