The Derivatives Magazine #23
Despite the fact that the total cryptocurrency market capitalization index had actually been at the same values within the last week period (around $900 billion), the middle of the week was more volatile than within the period of October 4-11. This was mainly due to the release of the USA CPI inflation data, which came in at an all-time high of 8.2% on an annualized basis. Initially, this negative signal caused markets to plummet (crypto market capitalization fell to $840 billion). However, it was then clarified that inflation for the past three months came in at an annualized rate of 2%, 11% lower than the previous quarter. The markets took this as an indicator of a relatively successful inflation control, and there was a "rebound", which not only fully compensated the losses from the initial news, but even caused a short-term increase in the total capitalization index relative to the values at the beginning of the period.
Such "swings" caused a record volume of liquidations over the past 4 weeks between October 13 and 15. During the fall, caused by the release of the initial data, there was liquidation of long positions of traders, who were probably waiting for positive data on the fight against inflation, but then a sharp reversal knocked out short positions of traders, who were counting on a further fall of the market. Overall, during this period of high volatility, 20% more long positions were liquidated than short ones. At the end of the period, activity declined and volumes returned to near minimum values.
For BTC futures contracts, the funding rate continues to remain near zero, while still being in the positive zone. The largest increases in open interest are seen in the FTX contract with an execution date of December 30 and the OKX contract with an execution date in late March.
The funding rate for the main ETH futures contracts is in the negative zone (from 1.81% to -3.27%), which may be an indicator that traders' medium-term expectations are slightly skewed towards further decline of the asset.
The situation with perpetual bitcoin swaps is similar to that of futures contracts. The funding rate is mostly in the positive zone, with the exception of FTX futures (7-day weighted average rate), traders' expectations look more or less consolidated.
In the case of Ether the situation is somewhat opposite: the weighted average 7-day funding rate is positive on Binance and Bybit and negative on FTX, OKX and Deribit.
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It should be noted that unlike futures contracts, in case of open-ended swaps there is an increase in open interest and trading volume for all leading contracts (which is not surprising, because in a situation of market uncertainty termed futures contracts are in less demand).
On October 18, there was a record outflow of BTC from exchanges over the last 4 months (about 37 800 BTC). This can obviously reduce selling pressure and could be a potential indicator of the beginning of BTC mass accumulation by large holders. The previous outflow of BTC from exchanges in June (but it should be noted that it was almost two times more voluminous) coincided with a local market reversal.
The level of open interest on BTC futures contracts decreased slightly, but during the last month actually does not go beyond the range of 12 000 - 16 000. The trading volume for the past week reached a local minimum on October 12, increased sharply on the day of the US inflation data publication, then returned to the initial low levels, typical of the low liquidity period in the market. In the case of ETH, volumes also grow only when any important economic news is released.
In recent weeks, the trading volume of a relatively new instrument for the cryptocurrency market - futures spreads - has sharply increased. According to Paradigm, a platform for institutional derivatives trading, the trading volume of this instrument via this platform has increased sevenfold since the end of mid-August (from $100 million to $700 million). The growing popularity of this instrument may be due to the relatively lower risks compared with the classical futures trading, as well as lower marginal requirements.
This overview was prepared by the analytics department of the Biqutex, an innovative crypto derivatives exchange. Trade an extended list of instruments (Perpetuals Swaps, Futures, Options, Calendar Spreads etc.) with up to 125x leverage and deep liquidity!
