Bloomberg: Bitcoin derivatives trading surged into speculators largest casino

As bitcoin price volatility declines, it is becoming boring for those who want to get rich overnight. However, the derivatives trading leader of the cryptocurrency has exploded.


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According to estimates by data tracking companies Skew and, global daily trading of Bitcoin derivatives is between $5 billion and $10 billion, which is 10 to 18 times the amount of bitcoin spot trading. Although it is difficult to obtain exact figures for these two transactions from major exchanges, their trading volume was basically flat at the beginning of this year.

BitMex and Binance-based headquarters in Asia offer bitcoin and small-currency futures contracts that are more than 100 times leveraged and are usually perpetual contracts, especially for traders. Attractive. Bitcoin has fallen nearly 60% since the end of 2017 and is also affected by low liquidity. The reason for the low liquidity is mainly due to the fact that bitcoin “whales” bought and held. For ten years, the number of bitcoins they controlled accounted for one-third of the total liquidity. Sid Shekhar, co-founder of TokenAnalyst, a London-based data tracking company, said:

“This is the most profitable place in the encryption field and the biggest casino ever.”


Exchange Bitcoin Futures 24-hour trading volume chart. Unit: One billion US dollars. Source: Skew

As more and more exchanges seek to allow customers to make more transactions, the number of trading participants is also increasing. On October 18th, Boston-based Circle Internet Financial Ltd. spun off the Poloniex exchange acquired 18 months ago to become an independent Asian-based company, in part to allow the company to offer derivatives trading services freely. . Circle CEO Jeremy Allaire said:

“It’s very cumbersome to offer this service in the US, the regulation is very strict, and it’s limited to Bitcoin. You can’t even offer the most popular products that people currently trade in the US.”

Andy Cheung, head of operations at OKex Exchange in Hong Kong, said that the number of derivatives traded on the exchange this year was twice the number of people trading in stock.

The world's largest encrypted spot exchange currency has launched its own futures products about a month ago. At present, there are more than 34,000 registered users of derivatives transactions, and the daily trading volume is about 500 million US dollars. On October 18th, the Hong Kong-based exchange began offering up to 125 times leveraged contract transactions. Zhao Changpeng, CEO of Coin, said:

“When using leveraged trading, traders don’t have to take up as much money as trading stocks. This makes futures trading more economical. That’s why futures trading is higher than spot trading in traditional markets.”

But in traditional markets, derivatives are often used to hedge commercial transactions. These are not common in the field of encryption. Emmanuel Goh, CEO of Skew and former derivatives trader at JPMorgan Chase, said:

“So far, the main use cases around this product (bitcoin derivatives trading) have been speculative activities.”

According to data from the exchange's BitMex, as bitcoin's volatility has recently fallen to less than 2% per day, traders have been looking for new ways to make money. For example, Coin Security now allows traders (many of them from Asia) to buy futures in the USDT trade pair, which is also a way to drive growth.

At the same time, some futures products have not received such a warm welcome. Earlier this year, Cboe Global Markets Inc., the first US-regulated bitcoin futures exchange, stopped bitcoin futures trading. So far, the transaction of physical delivery bitcoin futures contracts recently offered by the Intercontinental Exchange Inc.'s Bakkt exchange has been tepid.

Goh said that cryptocurrency futures entered a period of high development in 2018, when BitMex, which was under investigation by the US Commodity futures Trading Commission, was the first to introduce a Bitcoin futures perpetual contract, apparently compared to other derivatives. Individual investors are more likely to accept sustainable contracts. With a 100-fold leverage, the market is even more raging.

Shekhar said that “BitMex may currently be the center of the entire ecosystem”, which has the largest market share in global crypto-derivative transactions. Shekhar estimates that he earns at least $700,000 in commissions per day from derivatives trading.

But Goh believes that investors need to understand the risks and potential returns. He concluded:

“Derivatives contracts are a zero-sum game. If someone makes money, someone loses money.”