Binance takes up lion’s share of bitcoin futures
New York City: FTX handled 10% of the daily volume of BTC perpetual futures before it failed and filed for Chapter 11 bankruptcy in the US. Derivative exchanges are fighting for that 10%, and Binance is winning.
Recent court papers suggest FTX owes over $3.1 billion to its top 50 creditors and over $1.45 billion to its top 10 creditors. FTX, the third largest crypto trading network, filed for bankruptcy on November 11 amid allegations of poor financial health, in one of the greatest crypto implosions in history.
FTX commanded 10% of the daily volume of Bitcoin perpetual futures when it filed for bankruptcy, and Bybit, Binance, and OKX fell on the corpse.
Binance, which offered to buy FTX when it collapsed but revoked its offer, has seen its market share in perpetual futures volumes climb to 63% since November. Bybit earned three of FTX’s ten percentage points, while Deribit and OKX gained none.
Binance does not deliver or cover deals using perpetual futures cryptocurrencies; all transactions are paid in USDT or BUSD without influencing the spot market.
Derivatives derive their value from an underlying asset. Crypto futures allow traders to benefit from digital asset price movements without the security concerns and difficulties of storing and retaining cryptocurrency.
Futures are derivative financial contracts that require parties to trade an asset at a fixed price on a future date, regardless of the existing market price.
Robert Shiller invented perpetual futures in 1992 as a cash-settled futures market that may be held eternally without delivery or coverage.
In a cash settlement, the seller of a futures or options contract distributes cash instead of the underlying asset upon expiry. Futures markets are enabled with illiquid assets since the contracts have no fixed maturity date. In 2016, BitMex introduced perpetual futures markets to the bitcoin industry.
The speculative nature of perpetual futures is a primary reason why the US and UK barred crypto derivative exchanges from operating on their turf and prevented their people from using these markets. Perpetual futures are comparable to CFDs, which are outlawed in Hong Kong and the US.