Tag: Binance Futures

First US Bitcoin ETF Approaches Futures Contract Limit Days After Launch

by CryptoPotato

The ProShares Bitcoin Strategy ETF (ticker BITO) is proving more popular than it can handle. The fund is already nearing its limit on the number of futures contracts that the Chicago Mercantile Exchange (CME) permits it to hold.

Over Popularity of ProShares ETF

According to data collected by Bloomberg, the ETF is already holding 1,900 futures contracts for the month of October alone. The CME limits the number of contracts it can hold in its front month to 2,000, meaning only 100 are remaining.

Meanwhile, ProShares also has 1,400 futures contracts for November to avoid breaching its limit. However, the CME also imposed an absolute limit of 5,000 futures contracts to be held at a time. Given that BITO has accrued well more than half of that within three days of its launch, It is likely to meet that threshold quite soon.

BITO – the first US Bitcoin Futures ETF – had the second most successful opening day in NYSE history. It traded $500 million within its first hour after launch and nearly $1 billion across the day. This was topped only by a BlackRock carbon fund, which merely traded higher due to pre-seed investments.

If BITO continues to spread its holdings over longer-dated contracts, it risks distancing futures prices from Bitcoin’s actual price.

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Nate Geraci – president of the advisory firm “The ETF Store” – echoed this thought.

“The end result is the ETF will start taking on potentially significant tracking error versus the spot price of Bitcoin. The ETF is forced to obtain Bitcoin price exposure at higher and higher prices as it goes further out on the futures curve.”

Downsides of Futures ETFs

Most agree that the SEC’s Bitcoin Futures ETF approval was a critical regulatory development for the cryptocurrency space. However, many also consider a futures ETF to be a suboptimal investor solution compared to a spot-based one.

Alongside the price tracking errors, futures ETFs come packaged with a number of administration fees that take away from investors’ profits. By comparison, spot ETFs are virtually free of these downsides.

However, SEC chairman Gary Gensler is clear about being more open to futures-based ETFs. These are regulated by the Chicago Mercantile Exchange, which provides investor protections that he is fond of.

Featured Image Courtesy of TheBangkokPost

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FTX and Binance Futures Reduce Leverage to 20x, Prioritizing Consumer Protection

by CryptoPotato

Two of the leading cryptocurrency derivative trading platforms – Binance Futures and FTX – are reducing the maximum allowed leverage on their platforms.

  • Ran by Sam Bankman-Fried, FTX is one of the leading cryptocurrency derivatives trading platform, offering high leverage of up to 100x to its customers.

  • This, however, will no longer be the case as the exchange plans on trimming it down to 20x, citing consumer protection concerns.

  • Speaking on the matter, SBF actually revealed that the average leverage that users are currently taking advantage of is 2x. Hence, the move will only “hit a tiny fraction of activity on the platform.”

  • Quickly after that, Changpeng Zhao, CEO at Binance – the world’s leading cryptocurrency exchange, announced similar doings for their derivatives arm – Binance Futures.

Binance Futures started limited new users to max 20x leverage last Monday, July 19th – 7 days ago. (We didn’t want to make this a thingy).

In the interest of Consumer Protection, we will apply this to existing users progressively over the next few weeks.

Stay SAFU

  • Both moves come at a time when global financial regulators are taking measurable actions to interfere in the industry and somewhat put it under existing regulatory standards in traditional finance.

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‘Binance Markets Ltd Cannot Operate in the UK,’ FCA Says. ‘Nothing Has Changed,’ Binance Replies

by CryptoPotato

YESTERDAY, the UK’s Financial Conduct Authority issued a warning to Binance Markets Limited and the Binance Group, making it clear that Binance Markets Limited could not operate in the country as it is currently doing.

Binance Markets Limited is not permitted to undertake any regulated activity in the UK. This firm is part of a wider Group (Binance Group).

Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA.

No other entity in the Binance Group holds any form of UK authorisation, registration or licence to conduct regulated activity in the UK.

FCA: Binance Markets Limited Cannot Offer Derivatives in The UK

According to the official note, derivatives offerings are strictly prohibited for Binance as they are considered regulated products by the FCA.

That is to say, as per the British law, any firm that wants to offer or promote derivatives -such as futures, swaps, options or tokenized shares- must be registered and have the corresponding authorization.

A derivative is a type of security in which the parties agree that its value will depend on an underlying asset, for example, the price of a Tesla stock or the price of Bitcoin at a set point in time.

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Explanation of Binance Futures
Source: Binance

Binance is also obliged to publish a disclaimer on its social media sites and homepage warning that “Binance Markets Limited is not permitted to undertake any regulated activity in the UK.”

However, the FCA clarifies that the restrictions apply only to derivative products, recognizing that spot trading of cryptocurrencies is outside its regulatory powers.

Binance: Nothing Has Really Changed (For Now)

As scary as it may seem at first glance, the warning might not change much about the situation in which Binance currently operates.

Binance Markets Limited is not the entity offering the derivatives in the UK. With Binance being a global corporation based outside the country, the FCA rules do not apply to the full spectrum of Binance Group firms.

Also, it is important to note that Binance clients can continue using the platform, knowing that the UK authorities are under no obligation to protect them in the event of an eventuality.

Binance responded through its Twitter account, assuring that “the FCA UK notice has no direct impact on the services provided on http://Binance.com” and that its relationship with its users has not changed.

The world’s largest crypto exchange explained that in addition to being a whole other entity, Binance Markets Limited is not currently operational.

That is, the FCA’s warning is not, in fact, applicable to any of Binance’s branches right now.

So there’s no need to worry. And it seems like crypto traders know it. The news didn’t cause any major panic episode. Instead, BTC recovered a littler bit, spiking over 4% in the last 24 hours.

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New ATH: Binance Futures Processed Over $2 Trillion Trading Volume in April

by CryptoPotato

April turned out to be a record-breaking month for several cryptocurrencies, but also for the world’s leading digital asset exchange – Binance. The company reported its highest futures trading volume ever of more than $2 trillion.

Binance Futures Trading Volume Over $2T

The Malta-based crypto exchange giant published its April results yesterday, highlighting the record-breaking numbers in terms of trading volume for its futures platform.

The statement said Binance Futures processed $2.14 trillion in volume, which is a substantial increase of 54% compared to March. Furthermore, the platform also reached a 24-hour record of $121 billion worth of processed contracts.

This came amid a crypto massacre in which bitcoin fell below $50,000, and the entire market capitalization lost $300 billion in 24 hours on April 23rd.

Before this crash, though, BTC had peaked at $65,000 in mid-April, which resulted in a record for the open interest on Binance – over $13 billion.

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However, bitcoin’s subsequent retracement forced traders to “unwind their BTC leveraged long positions due to liquidation losses.” Consequently, the open interest fell below $10 billion by the end of the month.

Binance Futures Trading Volume vs. Open Interest. Source: Binance
Binance Futures Trading Volume vs. Open Interest. Source: Binance

CryptoPotato reached out to Binance, and a company representative attributed the growth seen at Binance Futures to several factors. Those include the overall performance in the crypto market, especially with the entrance of new “waves of institutional adopters.”

Since the beginning of the year, we have registered strong increases in both new and existing user activity at Binance Futures. The current upswing in market prices will result in higher demand for more liquidity and hedging tools such as futures and options, and we are well-placed to continue serving our users. – The representative also told CryptoPotato.

BTC Outperformed by ETH in April

Binance’s report touched upon the price performances of the most popular cryptocurrency assets as well. As mentioned above, bitcoin did register a new ATH but fell sharply after that and ultimately closed the month with a minor loss compared to March.

At the same time, Binance described ETH’s April as a “phenomenal month,” in which the second-largest digital asset saw an increase of 44%. Furthermore, ETH was more than 300% up from January 1st to April 30th.

The paper justified Ethereum’s surge with the high utilization of the network and the gradually increasing number of tokens locked in smart contracts. Additionally, the supply on exchanges keeps declining, while the demand for ether is quite high.

Binance believes investors are also bullish on Ethereum due to the upcoming EIP-1559 network upgrade, expected to address the “persistently” high gas fees.

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Binance Futures Daily Volume Hits ATH Above $100 Billion Amid Tumultuous Crypto Market

by CryptoPotato

As the crypto market goes through a roller-coaster week, Binance saw a spike in trading activities on its derivatives platform, pushing the daily volume to a new all-time high (ATH). 

Binance Futures Daily Volume Surpasses $100B

In an email shared with CryptoPotato, the leading exchange noted that Binance Futures’ 24-hour volume exceeded $100 billion yesterday, with data from Coingecko and CoinMarketCap confirming the milestone. 

Launched in 2019, Binance Futures quickly became the largest derivatives platform in the crypto market by trade volume in September 2020. 

Aaron Gong, the Vice President of Binance Futures, talking to CryptoPotato, noted that while it is exciting for the exchange to witness this remarkable growth, it also presents a challenge.

aaron_gong
Aaron Gong, VP of Binance Futures

He acknowledged that the adoption of Bitcoin and cryptocurrencies in general by large institutional investors had increased the public awareness of these virtual assets. 

Gong also said that with this new surge in interest, the exchange would have to keep up with the needs of its rapidly growing client base.

“Whilst exciting, the significant increase in user activity and trading volume also provides a challenge in our industry. Users naturally desire a smooth and fast trading experience, so this is as important a time as any to focus on ensuring we continue to provide a level of experience users would expect from a leading exchange.”

Improved User Experience And New Products

Gong added that Binance Futures is continuously improving its user experience to enable seamless transactions, in addition to introducing new investment products to its clients.

He mentioned Binance Futures’ latest investment product, the USDT-margined quarterly futures, which was released earlier this month. It offers “users the ability to choose according to two trading parameters (USDT-margined vs. coin-margined; quarterlies vs. perpetuals).”

When large traditional institutional investors are coming into the industry, the option of quarterly trading futures will enable them to engage in the crypto market in the same manner as they have been working in traditional finance.

$5.38 Billion Liquidated

While Binance Futures has recorded a new milestone in its daily volumes, investors were left counting losses as the crypto market suffered a big blow over the last 24 hours.

With Bitcoin dropping from $55,000 to a low $45,000 in hours, data revealed that a total of $5.38 billion was liquidated from the market across exchanges. 

liquidations
Total 24-Hour Liquidations Feb 23rd, 2021.

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Bitcoin (BTC) $ 26,503.10 0.28%
Ethereum (ETH) $ 1,837.45 0.77%
Litecoin (LTC) $ 89.25 0.66%
Bitcoin Cash (BCH) $ 111.16 0.29%