Valkyrie Leveraged Bitcoin Futures ETF gets inspiration from TradFi memes

May 17, 2023 Coin Telegraph

After being initially discussed in 2021, the investment fund is now capitalizing on the meme-worthy ticker for its new leveraged Bitcoin ETF.

In its latest futures-based exchange-traded fund (ETF) filing, Valkyrie Funds utilizes one of the popular memes from the financial Twitter community, known as “fintwit,” to capture attention and interest.

On May 16, the investment firm submitted a new application for a Bitcoin (BTC) futures-based ETF to be listed on the Nasdaq with the ticker symbol “BTFD.“

Both of Valkyrie’s Bitcoin-centric funds do not have direct exposure to Bitcoin itself; instead, they invest in Bitcoin futures traded on the Chicago Mercantile Exchange. Bitcoin futures are financial contracts that allow investors to speculate on the future price movements of Bitcoin. These contracts obligate the buyer to purchase or the seller to sell Bitcoin at a predetermined price on a specific future date. Unlike trading Bitcoin — which involves owning and holding the digital asset itself — Bitcoin futures enable traders to speculate on the price of Bitcoin without directly owning it.

Initially intended for the first fund, the suggestive ticker was reportedly modified by the firm in October 2021.

In contrast to the firm’s existing block trading facility (BTF) fund, this newly proposed fund will offer leverage, allowing speculators to increase their exposure to the dominant cryptocurrency. A BTF is an actively managed ETF available through Nasdaq that invests primarily in Bitcoin futures contracts.

Up to this point, the market has witnessed the introduction of four distinct Bitcoin futures-based ETFs. The first, ProShares Bitcoin Futures ETF, was l aunched in October 2021.

Thus far, the Securities and Exchange Commission (SEC) has denied several attempts to introduce Bitcoin spot ETFs or funds that provide direct exposure to the dominant cryptocurrency, citing concerns regarding potential market manipulation in the Bitcoin market.

Grayscale, a digital asset manager, is currently involved in a prolonged legal dispute with the SEC as it seeks to transform its struggling Grayscale Bitcoin Trust product (GBTC) into a spot Bitcoin ETF. The investment firm criticized the Commission's decision to authorize futures-based ETFs instead of spot ETFs, deeming it "illogical."

In March, the judges presiding over the dispute between the two entities in the United States (U.S.) Court of Appeals for the D.C. Circuit expressed the view that the SEC "must provide a thorough explanation" regarding its understanding of the connection between Bitcoin futures and the spot price of Bitcoin.

Magazine: Ordinals turned Bitcoin into a worse version of Ethereum: Can we fix it?

London Stock Exchange may provide clearing services for BTC derivatives starting in Q4

April 13, 2023 Coin Telegraph

bitcoin futures

LCH SA will team up with the FCA-regulated GFO-X trading venue to create a centrally cleared, regulated trading environment.

The United Kingdom could see its first centrally cleared trading venue for digital asset derivatives due to a partnership between a London Stock Exchange Group (LSEG) business and trading startup Global Futures and Options (GFO-X). They intend to launch the service in the fourth quarter of this year.

According to an April 11 announcement, LCH SA, the Paris-based subsidiary of the LSEG clearinghouse, is set to provide clearing services for dollar-denominated, cash-settled Bitcoin (BTC) index futures and options contracts traded on the GFO-X venue. The plan still requires regulatory approval.

Digital Assets: LCH SA To Offer Clearing Services For Bitcoin F&O Contracts Traded On GFO-X https://t.co/n1bF2ZbZwp
— DailyAlts (@DailyAlts) April 13, 2023

GFO-X is regulated by the United Kingdom's Financial Conduct Authority (FCA) to operate a multilateral trading facility. GFO-X CEO and cofounder Arnab Sen described the company as “The UK’s first regulated and centrally cleared trading venue focused entirely on digital asset futures and options.”

LCH SA has created a new, segregated clearing service called LCH DigitalAssetClear. Frank SoussanM head of LCH DigitalAssetClear, said:

“Bitcoin index futures and options are a rapidly growing asset class, with increasing interest among institutional market participants looking for access within a regulated environment they are familiar with.”

Traditional financial institutions and other major corporations are increasingly moving into digital assets. In January, Samsung launched a Bitcoin exchange-traded fund (ETF) on the Hong Kong Stock Exchange. The Tel Aviv Stock Exchange is seeking to expand its crypto trading. Meanwhile, a Boerse Stuttgart Digital subsidiary recently received approval from German regulators to offer crypto custody service. Nasdaq is expected to launch a crypto custody service in the first half of this year.

Magazine: Pro-XRP lawyer John Deaton ‘10x more into BTC, 4x more into ETH’: Hall of Flame

Argentina securities regulator approves Bitcoin futures index

April 12, 2023 Coin Telegraph

Argentina

The regulated Bitcoin futures index is reportedly a first in Latin America and is set to debut in May.

The securities regulator of Argentina has approved a Bitcoin-based futures index set to debut on the Matba Rofex exchange. The Bitcoin (BTC) futures contract will start trading in May, with the exchange claiming it would be the first regulated Bitcoin futures index in Latin America.

The National Commission of Value (CNV), the country’s securities regulator, approved the Bitcoin futures index as part of a strategic innovation agenda. The innovation agenda, which launched in the first quarter of 2022, is focused on creating a space for public-private collaboration to develop new and creative products in the capital market.

The Bitcoin futures contract will be based on the price of BTC provided by various entities in the nation offering BTC/ARS trading pairs. All trades will be settled in the national fiat currency, with traders required to deposit Argentine pesos through bank transfer.

For the provision and use of payment services in the nation, an exchange providing these contracts must ensure it has a valid contract with a payment services provider registered with the Central Bank of the Argentine Republic.

The regulated Bitcoin futures index would offer qualified investors a safe way to gain BTC exposure in a transparent and regulated environment. At the same time, the CNV has also asked the Matba Rofex exchange to incorporate alerts that warn investors of the risks associated with such financial instruments.

Argentina is struggling with high inflation, and many citizens have turned to Bitcoin to mitigate the effects. The country’s peer-to-peer Bitcoin trading volume has also hit new highs amid soaring inflation.

*P2P Bitcoin trading volume. Source: CoinDance*

A recent bill proposed by the Ministry of Economy encouraged citizens to declare their crypto holdings and incentivized them with tax benefits. Over the years, the South American nation has taken a pro-crypto stance, with crypto adoption nearly double its neighboring countries.

*Crypto penetration in Argentina. Source: Canva*

The launch of the Bitcoin futures contract also comes just a week after Binance announced its expansion to Argentina. Binance CEO Changpeng Zhao shared the news of the latest approval.

Smaller investors can have outsized impact on crypto investment markets: BIS study

April 6, 2023 Coin Telegraph

bitcoin futures

Researchers looking at the “crypto carry” rate between spot and futures markets and its causes came to conclusions about crypto market booms and busts and how they happen.

The Bank for International Settlements (BIS) has released a working paper examining “crypto carry” — the differences between Bitcoin (BTC) and Ether (ETH) spot and futures prices — and its effect on crypto investment markets. The complex paper sheds light on the behavior of crypto investors, particularly smaller investors, in relation to boom and bust cycles.

“Carry” describes the results of “going long in the spot market, while selling forward the same amount forward via a futures contract.” The paper bases its findings on “stylized facts” based on a variety of exchanges over time.

Very little of the carry size — about 3% — resulted from differences between interest rates on crypto and fiat or variations among exchanges, which may be crypto-native, like Binance and OKX, or regulated like the Chicago Mercantile Exchange (CME). The major factor was the convenience yield of holding futures:

“Crypto carry is large (up to 60% p.a.), strongly time-varying, and is most compatible with the existence of a highly volatile crypto futures convenience yield, i.e. investors are willing to pay more for the convenience of a levered futures contract relative to buying spot crypto.”

Rising crypto carry was found, based on the evidence of traders on the CME, to be associated with “a rise in net long positions by ‘nonreportable’ traders,” such as “family offices, proprietary trading shops that run commodity trend-following strategies, and/or wealthy individuals.”

Those buyers take levered futures positions “when there are strong price trends and heightened media attention.” Sellers experience risks from price volatility at the same time, the argument continued, making capital on the sell side “scarce and slow-moving.”

Smaller leveraged investors chasing the trend and the relative scarcity of arbitrage capital are the two main reasons for the large “crypto carry” of up to 60% in #Bitcoin and #Ethereum https://t.co/GVUOze61mc pic.twitter.com/fKpW55Rbhn
— Bank for International Settlements (@BIS_org) April 4, 2023

This situation has notable consequences. It causes a high carry rate. Furthermore, “The interplay between these forces […] Help[s] explain why severe price run-ups and market crashes are a frequent feature of crypto markets,” the authors wrote. Thus, the size of crypto carry can partly predict market crashes because of its correlation with convenience yield. In traditional markets, convenience yield describes the premium of holding an underlying asset rather than its derivative. The authors wrote:

“One of the most salient features of crypto markets over the past years, namely rapid price booms followed by large busts, seem to be linked to the drivers of the crypto convenience yields.”

Magazine: ‘Deflation’ is a dumb way to approach tokenomics… and other sacred cows

Betting on turmoil: Deribit launches Bitcoin volatility futures

March 17, 2023 Coin Telegraph

bitcoin futures

Volatility products are popular with traditional investors, as they enable portfolio hedging, risk management and speculation.

Crypto derivatives exchange Deribit will soon launch Bitcoin (BTC) volatility futures, giving investors a direct way to measure and trade BTC market volatility.

On March 17, Deribit introduced BTC DVOL futures — a derivatives contract built on the Deribit Bitcoin Volatility Index, which measures the implied volatility of the largest cryptocurrency. Deribit’s volatility gauge provides a 30-day outlook on investors’ expectations for annualized volatility.

Like other volatility products, BTC DVOL can potentially help traders with risk management, portfolio hedging or market speculation.

Volatility-as-an-asset is widely traded in traditional finance, with the most popular product being the Chicago Board Options Exchange Volatility Index, also known as VIX. The VIX fluctuates on a scale of 1-100, with 20 representing the historical average. Readings below 20 signal lower implied volatility than the historical mean. Readings above 20 are usually associated with more turbulent financial conditions; anything above 30 signals significant market volatility, usually due to uncertainty, risk, or investor fear.

VIX measures the volatility of S&P 500 Index options, a leading indicator of the U.S. stock market.

*Traditional markets have battled extreme volatility over the past 12 months, marked by major fluctuations in the S&P 500 Index and broader stock market. Source: Yahoo Finance.*

Bitcoin and the broader crypto markets have exhibited extreme volatility over the past 12 months. The period known as crypto winter is usually associated with deep corrections in digital asset prices following an over-extended bullish phase.

Although crypto investment products experienced record outflows last week following the collapse of Silicon Valley Bank and Signature Bank, regulatory clarity on investor deposits has helped Bitcoin stage a large relief rally. Bitcoin’s price crossed $27,000 on March 17 for the first time in over nine months.

Bitcoin surges past $24,000 on CME launch of BTC event contracts

March 13, 2023 Coin Telegraph

Bitcoin surges past ,000 on CME launch of BTC event contracts

bitcoin futures

Bitcoin futures on CME have traded 550,000 contracts since inception.

On Mar. 13, American derivatives marketplace CME announced the launch of Bitcoin (BTC) futures event contracts. The exchange, which is fully regulated and has cleared administrative review, will henceforth facilitate cash-settled, daily expiring contracts tied to Bitcoin futures with a "lower-cost way for investors to trade their views on the up or down price moves of bitcoin." Tim McCourt, global head of equity and FX products at CME Group, commented:

Our new event contracts on Bitcoin futures provide a limited-risk, highly transparent way for a wide range of investors to access the bitcoin market via a fully regulated exchange. These cash-settled, daily expiring contracts will further complement our existing suite which have traded more than 550,000 contracts to-date.

On Mar. 10, Cointelegraph reported that asset manager VanEck's spot Bitcoin trust application was denied by the U.S. Securities and Exchange Commission (SEC). The commissioners noted that the SEC had denied every application for a spot Bitcoin trust that has been filed, amounting to almost 20 over the last six years.

Days prior, digital currency management firm Grayscale published a transcript related to its ongoing lawsuit with the SEC over the denial of its Grayscale Bitcoin Trust (GBTC) to be converted into an exchange-traded fund. According to the transcript, judge Neomi Rao commented:

"Because it seems to me that these things, I mean, you know, one is just essentially a derivative of the other. They move together 99.9% of the time. So where’s the gap in the Commission’s view?"

Currently, GBTC is trading at a discount of 38.19% to net asset value, up from a historic low of 50%. The firm's litigation with the SEC is ongoing.

Samsung investment arm to launch Bitcoin Futures ETF amid rising crypto interest

January 12, 2023 Coin Telegraph

bitcoin futures

Hong Kong investors can now gain exposure to Bitcoin through Samsung's new ETF listing, launching on Jan. 13.

In Hong Kong, the bell rings for Bitcoin (BTC). Samsung Asset Management Hong Kong (SAMHK), a subsidiary of Samsung's investment arm Samsung Asset Management, is set to list the "Samsung Bitcoin Futures Active ETF" on the Hong Kong stock market on Jan. 13.

The move comes amid a surge in interest from both the government and institutional investors in the region.

The Hong Kong Stock Exchange. Source: thetradenews.com

The ETF, or exchange-traded fund, will track the spot price of Bitcoin by investing in Bitcoin futures products listed on the Chicago Mercantile Exchange (CME). The ETF will primarily invest in the CME Bitcoin Futures, with some investments in the CME Micro-Bitcoin Futures.

Currently, Hong Kong is the only market in Asia where Bitcoin futures ETFs can be traded. The Samsung Bitcoin Futures ETF joins the Hong Kong Crypto Futures ETF, which began trading to the tune of $70 million in 2022. Other markets worldwide include Canada, the U.S., Australia, and some European countries such as Switzerland.

Park Seong-jin, head of Samsung Asset Management Hong Kong, commented:

“Hong Kong is the only market in Asia where Bitcoin futures ETFs are listed and traded in the institutional market. It will be a new option for investors who are interested in Bitcoin as a competitive product that reflects their experience in risk management.”

This ETF listing will provide retail and institutional investors with a new way to gain exposure to Bitcoin, which may help to attract more mainstream investors to the cryptocurrency space. With Samsung's reputation and brand power, the ETF could be an attractive option for investors who are looking for a way to invest in Bitcoin without buying and holding their own private keys directly.

The move by Samsung comes as the price of Bitcoin surpassed the $18,000 level, indicating a potential rise in positive sentiment among traders. Other cryptocurrencies have also followed suit, recording a recovery in the broader crypto market.

In 2022, Samsung Asset Management Hong Kong Limited held $1.4 bn assets under management, while the globally recognized brand of Samsung continues to be actively involved in the crypto space. The South Korean company, valued at over $300 billion, boasts a blockchain wallet while the flagship smartphone, Galaxy S22 comes with a preinstalled crypto.

The ETF is a further indication that the global brand is looking to capitalize on the growing interest in cryptocurrencies.

Bitcoin rebound to $18.4K? BTC price derivatives show strength at key support zone

December 21, 2022 Coin Telegraph

Bitcoin rebound to .4K? BTC price derivatives show strength at key support zone

Bankruptcy

Miners are in deep trouble due to increased hash rate and energy costs, but pro traders slightly added to their longs despite the recent BTC pullback.

Bitcoin (BTC) price lost 11.3% between Dec. 14 and Dec. 18 after briefly testing the $18,300 resistance.

The move followed a 7-day correction of 8% in the S&P500 futures after the U.S. Federal Reserve chair Jerome Powell issued hawkish statements after raising the interest rate on Dec. 14.

Bitcoin price retreats to channel support

Macroeconomic trends have been the main driver of recent movements. For instance, the latest bounce from the 5-week-long ascending channel support at $16,400 has been attributed to the Central Bank of Japan's efforts to contain inflation.

*Bitcoin 12-hour price index, USD. Source: TradingView*

The Bank of Japan increased the limit on government bond yields on Dec. 20, which are now trading at levels unseen since 2015.

However, not everything has been positive for Bitcoin as miners have struggled with the hash rate nearing all-time high and increased energy costs. For example, on Dec. 20, Bitcoin miner Greenidge reached an agreement with its creditor to restructure $74 million worth of debt — although the deal requires the miner to sell nearly 50% of their equipment.

Moreover, Bitcoin mining listed company Core Scientific reportedly filed for Chapter 11 bankruptcy on Dec 21. While the company continues to generate positive cash flows, the income is insufficient to cover the operational costs, which involve repaying the lease for its Bitcoin mining equipment.

During these events, Bitcoin has held $16,800, so there are buyers at these levels. But let's look at crypto derivatives data to understand whether investors have increased their risk appetite for Bitcoin.

Bitcoin futures are back to backwardation

Fixed-month futures contracts usually trade at a slight premium to regular spot markets because sellers demand more money to withhold settlement for longer. Technically known as contango, this situation is not exclusive to crypto assets.

In healthy markets, futures should trade at a 4% to 8% annualized premium, which is enough to compensate for the risks plus the cost of capital.

*Bitcoin 2-month futures annualized premium. Source: Laevitas.ch*

It becomes clear that the attempts to push the indicator above zero have utterly failed over the past 30 days. The absence of a Bitcoin futures premium indicates higher demand for bearish bets, and the metric has worsened from Dec. 14 to Dec. 21.

The current 1.5% discount indicates professional traders' reluctance to add leveraged long (bull) positions despite being actually paid to do so.

Top traders unwilling to let go of their longs

Still, investors should analyze the long-to-short ratio to exclude externalities that have solely impacted the quarterly contracts' premium.

The metric gathers data from exchange clients' positions on the spot and perpetual contracts, better informing how professional traders are positioned.

*Exchanges' top traders Bitcoin long-to-short ratio. Source: Coinglass*

Even though Bitcoin briefly traded below $16,300 on Dec. 19, professional traders did not reduce their leverage long positions according to the long-to-short indicator. For instance, the Huobi traders' ratio stabilized at 1.01 between Dec. 16 and Dec. 21.

Similarly, OKX displayed a modest increase in its long-to-short ratio, as the indicator moved from 1.02 to the current 1.04 in five days.

Lastly, the metric slightly increased from 1.05 to 1.07 at Binance, confirming that traders did not become bearish after the ascending channel support was tested.

Strength of $16,800 support is a bullish indicator

Traders cannot ascertain that the absence of a futures premium necessarily translates to bearish price expectations — for instance, the lack of confidence in the exchanges could have driven away potential leverage buyers.

Moreover, the resilience of the top traders' long-to-short ratio has shown that whales and market makers did not reduce leverage longs despite the recent price dip.

In essence, the Bitcoin price movement has been surprisingly positive, considering the negative newsflow from miners and the bearish influence of raising interest rates on risk markets.

Therefore, as long as the $16,500 channel support continues to hold, bulls have reason to believe that another shot at the $18,400 upper band limit is viable before year-end.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.