Crypto Derivatives Trade Rises As Investors Hedge Positions After FTX Shock

Nov 10 (Reuters) – Trading volumes in bitcoin futures and exchange-traded funds (ETFs) soared as investors scrambled to hedge their positions after this week’s digital token plunge sparked by the turmoil of crypto exchange FTX.

November CME bitcoin futures were trading at $17,250, with volume at 13,292 as of 11:24 a.m. EST (1624 GMT), a 3% discount from the spot price of $17,770.

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

Bitcoin rebounded 10% on Thursday after hitting a late-2020 low earlier in the day as the biggest crypto exchange Binance pulled away from a bailout of FTX, leaving the firm’s urgent pressure to fill an $8 billion hole in its finances.

Bitcoin short strategy ETF ProShares (BITI.P), a bearish play on CME Bitcoin futures, saw record trading volume on Wednesday as investors sought a “regulated and transparent futures market”, it said. Simeon Hyman, ProShares Global Investment Strategist.

“This suggests an extremely strong unison desire to hedge, with shorts being the predominant force in leveraged exposure at the moment,” said Vetle Lunde, an analyst at Norwegian crypto research firm Arcane Research.

Meanwhile, ProShares Bitcoin Strategy ETF (BITO.P), which halted trading on Wednesday, saw a 300% increase in trading volume from its previous high on October 21, 2022.

The BITO fund’s assets under management have shrunk by nearly a third since its launch nearly a year ago to around $500 million, according to data from Refinitiv Lipper.

Funding rates that represent sentiment in the perpetual swap 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, said Lunde of Arcane Research.

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

Some market participants have reported encountering issues borrowing and shorting cryptocurrencies.

“We’ve been trading a spot for the past few days and the trading desks are very conservative on risk management right now, so it wouldn’t surprise me if the futures markets are getting a little difficult to navigate,” said Greg King. , general director. to Osprey Funds.

Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru Editing by Matthew Lewis

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