Despite FTX Collapse Bitcoin Futures Surge

ForbesPublished on 2022-11-17Last updated on 2022-11-17

Abstract

As lesser investors flee the FTX-ravaged cryptocurrency sector, institutions are ratcheting up their long positions in the futures markets for the BTC and ETH.

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As lesser investors flee the FTX-ravaged cryptocurrency sector, institutions are ratcheting up their long positions in the futures markets for the two leading tokens.

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CME Group reported a 42% increase in open interest contracts for bitcoin futures this month to 18,713 as of Nov.11. Each contract on the regulated Chicago-based derivatives exchange–the world’s largest–is equivalent to 5 bitcoin, or $81,780 at today’s price. Open interest refers to the money that investors tie up at an exchange as collateral for open positions.

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Ether saw an even-steeper 62% jump in futures open interest relative to the end of October. These contracts are for 50 coins, or approximately $61,250. The combined CME Group open interest for bitcoin and ether reached approximately $1.5 billion on Friday.

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CME bitcoin and ether trading futures

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Far from dissuading institutions from trading in crypto futures, the rise in volatility has attracted CME market participants, including ProShares for its Bitcoin Strategy ETF (BITO) and nonbank hedge funds that match their selling trades to crypto funds’ buying positions.

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Gibraltar-based LMAX Digital, one of the most respected spot crypto exchanges for institutional clients, experienced a 133% rise in its daily trading volume since Nov. 4, prior to the FTX collapse.

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LMAX daily trading volume during October

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In that time period, the global cryptocurrency market has shrunk 22.3% to $823 billion.

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Cryptocurrency prices have been punished by the fall of FTX, the Bahamas-based crypto exchange, and its sister company Alameda Research, a hedge fund. Bitcoin retreated to 2020 levels as low ast $15,892 over the weekend. It has since recouped to $16,359 per bitcoin, though still 23% down from Nov. 4, according to Nomics.

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Ether has also tumbled 25% over the same period to $1,224.

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Deposits into cryptocurrency have also increased. While retail customers may be reeling from frozen funds and billions in limbo because of the FTX bankruptcy, Europe-based Coinshares, a large spot crypto money manager, reported inflows of $42 million to the digital-asset fund industry during the first week of the FTX crisis. This was the highest amount of inflows after two months of no meaningful change in fund assets under management.

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