(Bloomberg) — The turmoil caused by the implosion of crypto-empire FTX is rippling into the Bitcoin futures market.
(Bloomberg) — The turmoil caused by the implosion of crypto-empire FTX is rippling into the Bitcoin futures market.
The Bitcoin futures curve is in so-called backwardation, meaning its spot price is higher than its futures price, something that didn’t happen during previous selloffs, according to Ilan Solot, co‑head of digital assets at Marex Solutions.
“The obvious answer is speculative shorts, perhaps by institutional players that skew towards futures trading,” Solot said in a note. “Some of it could be proxy hedging by investors with funds locked, staked or inaccessible.”
Solot said the reversal may also reflect the unwinding of hedges. Exchanges or trading desks holding Bitcoin for clients may have sold them to reinvest the proceeds temporarily, using futures to hedge the risk the price would rise. With investors skittish since the FTX collapse, some of those trades could be in the process of being unwound as clients pull out funds.
“To unwind the trade, exchanges and trading desks need to sell the futures and buy back spot BTC (probably in the OTC market), making the curve invert,” he said.
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The crypto market is undergoing a historic bout of volatility amid the swift implosion of the once-popular digital-assets exchange FTX, which filed for bankruptcy last week.
The price of Bitcoin, the largest token, is down more than 20% over the last week to around $16,500. It had touched nearly $69,000 just a year ago. Ether has shed about a quarter of its value, while the FTX token FTT has lost roughly 95% and is trading around $1.60, Bloomberg data show.
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