21 Jun 2022

Derivatives Update: Open Interest in perps remains high

CME futures are trading above offshore market as sell-off sent FTX futures in brief backwardation, meanwhile funding rates remains neutral to negative while OI stays bloated.
Derivates (4).svg
The CME premium remains sticky
Source: Skew
Yields remain low in the 1-3% range. Since Monday, CME has traded at a consistent premium to the offshore market. FTX consistently traded at a premium to the other venues in May but is now trading considerably below its peers. FTX was involved in liquidating Three Arrows Capital, which might be the catalyst behind the reduced premiums on FTX.CME’s premium to the offshore market might, in part, be lifted by BITO’s strong inflows last week. It will be interesting to see if the launch of BITI may impact the CME basis in the coming weeks, as access to short-selling bitcoin becomes easier.
Perps still tend to trade at a discount to spot
No noteworthy developments in BTC perps over the last week. With bitcoin oscillating around $20,000, funding rates stay negative.
Source: Skew
Deribit saw the largest funding rate impact during last week’s 3AC-related chaos. The Deribit funding rate reached -0.053%, the lowest since May 19th, 2021. The plunging Deribit funding rates came amid growing fears of Deribit insolvency due to the 3AC collapse. Also Deribit publicly announced that Deribit would remain financially healthy, even if debts were not repaid. Funding rates have since stabilized.
Open interest in perps still elevated around 300,000 BTC
While funding rates remain low, the BTC-denominated open interest remains elevated, still sitting at around 300,000 BTC.
Source: Laevitas
The BTC-denominated OI moved in erratic bursts during the market meltdown last week and peaked at a new all-time high of 335,000 on Wednesday, with bitcoin trading at $20,170. BTC’s recovery to 21,500 led OI to plunge, an indication of a short squeeze. Similar tendencies were seen over the weekend, where the BTC perp OI spiked at 325,000 BTC as BTC plunged to $17,600. OI has since declined slowly alongside the recovering market.
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