- Bitcoin futures trading has soared after the launch of spot ETFs in the US this month, the FT reported.
- The CME Group has seen trading of bitcoin futures contracts reach a new high.
- Futures traders are pursuing a “cash and carry” arbitrage trade on bitcoin, per the FT.
Futures traders are piling into bitcoin contracts.
An average 66,000 futures contracts have been exchanged daily this month at the CME Group, marking a new high and an almost 50% rise month-to-month, according to The Financial Times.
January’s open interest is already equal to about $4.6 billion, and rose to around $6 billion on the day the ETFs were given the green light by the Securities and Exchange Commission.
While the high trading volumes show that the ETFs may have sparked interest in crypto among more mainstream investors, the heavy futures trading is more about arbitrage opportunities in bitcoin’s volatile price swings.
Per, the FT, using the “cash and carry” strategy, traders sell a bitcoin futures contract at a premium, while also holding the underlying crypto. As the contract’s expiration date nears, these prices move closer together, and the trade can generate significant returns with low risk. Since the approval of the ETFs, the trade has garnered more attention as holding shares of the fund can be a cheaper way to hang onto exposure to the token.
The swell of activity has allowed CME to eclipse Binance as the largest bitcoin derivatives trading exchange in the world. The company tends to work alongside asset management firms and hedge funds.
As for other corners of Wall Street, the ETFs' launch has yet to trigger overwhelming bullishness as had been projected by some crypto enthusiasts.
Instead, in the over two weeks of trading, crypto asset manager Grayscale has seen large outflows from its ETF, while bitcoin itself has flailed. The token whipsawed in the weeks since the SEC's approval, falling below the key $40,000 threshold last week, and is trading basically where at the beginning of this month.
In a Thursday note, JPMorgan's Nikolaos Panigirtzoglou, highlighted that the spot ETFs will likely help deepen the crypto market and further developments could boost derivatives trading.
"The emergence of spot ETFs is introducing another dimension in the bitcoin price discovery process along with onshore spot exchanges and onshore futures that echoes the price discovery that is taking place in the traditional financial system, in particular in equities where ETFs are more prevalent," he wrote.