BitMEX used to be the undisputed leader in Bitcoin (BTC) futures trading, and if anything similar to the civilian enforcement taken yesterday in 2015-2018, the cryptocurrency market will collapse completely.
Despite a partial recovery to $ 10,600, which was relatively rapid, derivatives markets remained flat below the $ 500 decline to $ 10,400. Neither BTC futures nor options showed any signs of discomfort among the negative news.
The futures market almost completely ignored this event, and this is a clear sign that investors remain optimistic. It also indicates that the markets will test $ 12,000 earlier than one might have expected.
As explained above, BitMEX has acquired almost 50% of its market share since July 2019. This feature stems from the fact that it was the predecessor to the so-called perpetual contracts (reverse swaps). In addition to not being a KYC requirement, derivative exchanges also provide up to 100 times leverage, which has helped expand the user base.
After a market correction on Black Thursday drove the bitcoin price below $ 3600, competing exchanges tried to offer similar services, which led to BitMEX losing its dominant position during 2019.
Some in the cryptocurrency community believe that blocking US customers of BitMEX was the main reason for the loss of market share, while others point to their powerful settlement mechanism as a catalyst.
During the March 13 crash, BitMEX ran into technical issues and went offline for 25 minutes. Somehow, when the crash happened and the bitcoin price dropped below $ 4,000, the BitMEX Insurance Fund managed to increase its stake by 1,000 bitcoins over the next 48 hours. Since then, open interest in BitMEX futures has been locked in below $ 1 billion.
Based on the latest data, BitMEX has become almost irrelevant in size. The market share has remained around 18% for the past three months, and although it is impossible to measure the stock exchange’s impact on BTC pricing, it has clearly lost its advantage over the last eighteen months.
Bitcoin Futures remained unchanged despite news
The underlying index compares the price of a futures contract with the current level of conventional spot exchanges. It is also called the futures prize.
Health markets usually offer between 5% and 15% per year in a condition called contango. On the other hand, negative bases (discounted futures contracts) tend to occur in very bearish markets.
The chart above shows a 3-month contract premium of 5.4% or higher for each exchange except BitMEX. Initially, professional traders point out that yesterday’s events did not affect their expectations.
If anything is excluded from yesterday’s news, it is that this is a stock market problem that has little or no effect on the futures markets in general.
It is worth noting that futures premiums can remain relatively constant while investors close their positions. This will undoubtedly be a very worrying situation, as it may indicate traders’ concerns about the stock exchange’s liquidity.
From this point of view, open interest is the most important proof of investor confidence in a particular market or stock exchange.
Even if the total does not change, the massive migration from BitMEX to other exchanges will be reflected in the data on open interest.
Notice how calm yesterday’s news was. BitMEX’s open interest reached $ 650 million, a decrease of 11% from the previous day, while the sum remained virtually unchanged.
Huobi has absorbed most of the changes, indicating that some traders have probably changed position.
Sentiment for Bitcoin options remains neutral
A delta deviation of 25% is useful for assessing the morale of professional traders when using option prices. By comparing the implied volatility of call and put options with similar risks, an investor can confirm whether buying (bullish) or selling (bearish) is more expensive.