There is a small ripple effect of Archegos Capital’s multi-billion dollar fallout on the cryptocurrency world, which is reflected in the CME Bitcoin futures premium. But the cryptocurrency market will hardly be affected.
The latest Wall Street crisis is linked to the rapid risk reduction caused by the trade crisis at Archegos Capital, a family office that manages at least $ 10 billion that put $ 50-80 billion in leverage, resulting in nearly $ 5 billion in losses for the Swiss Credit Suisse. and the departure this week of his head of the investment bank.
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The Chicago CME, which offers traditional financial gamblers access to bitcoin through its popular futures contract, may have been slightly affected, as seen from its CME futures premium or the price reflected in futures contracts minus the current spot price. This markup lagged behind that on popular retail-focused exchanges including Binance, Deribit, FTX, and OKEx.
According to one of the leading investors in the crypto industry, the discrepancy could reflect a decline in leveraged funds on Wall Street.
“In the traditional finance space, we are seeing leverage shrinking all over the place,” Jeff Dorman, chief investment officer of digital asset investment firm Arca Funds, told CoinDesk in a telephone interview. “CME mainly serves your typical large hedge funds, large mutual funds, and the leverage is less than it used to be because the leverage pressure from major brokers and exchanges has been limited” in traditional markets.
On the CME, the annual premium rate on bitcoin futures, the gap between the price of long-term bitcoin futures contracts and the current spot market price, averages 8.67%. This compares to the 27% -31% range on crypto exchanges including FTX, Deribit, Binance and OKEx, according to crypto derivatives data provider Skew.
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The difference between the premiums of bitcoin futures on CME and other cryptocurrency exchanges has widened since late March when problems arose at Bill Hwan’s Archegos Capital.
Patrick Heusser, senior cryptocurrency trader at Crypto Broker AG based in Zurich, explained that the futures premium is sometimes a function of the demand for leverage from exchange traders.
In a bull market, as it is now, “traders who want to go long with leverage are willing to pay the premium, the cost of the leverage,” Heusser said. Because “you don’t have much leverage over CME, the future premium isn’t that big or big” compared to other platforms.
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In theory, the CME futures premium should be lower than other crypto exchanges due to stricter trading rules and limited leverage positions, Heusser added.
Another explanation is that the premium on cryptocurrency exchanges has been growing since the end of March due to the optimistic views of bitcoin traders.
“There are probably more overly confident traders and longer leveraged positions,” says Bendik Norheim Schei, head of research at Arcane Research. “Traders expect higher prices and go long.”
According to Dorman, traders on retail-focused crypto derivatives exchanges “are already in the crypto ecosystem.” “It’s just a completely different investor base and a completely different leverage base. So what happens is, you still have really aggressive investors in the cryptocurrency world trying to buy as much risk as possible. “
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