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15 May 2020

Market Commentary: Bitcoin Hashrate Futures

Patrick Heusser

Patrick Heusser

Senior Trader at Crypto Broker AG

About the author

FTX did it again! They launched a new product called…

Bitcoin Hashrate Futures

They launched 3 contracts:

BTC-HASH-2020Q3
BTC-HASH-2020Q4
BTC-HASH-2021Q1

In short, you trade the average hashpower that was being used to mine BTC for a full quarter.

The concept is similar to the Fed fund futures, where you can hold the contract until the end date (as opposed to three-month money market futures). This means volatility of the hashrate future will decrease over time due to the fact that each day an unknown value is revealed to calculate the ultimate fixing price.

Who will trade this?

If I think about the parties involved in bitcoin, the following come to mind:

– Miners
– Mining equipment producers
– Speculators

I already feel uneasy while putting this list together. Two out of three in the above group have a great deal of hashrate market information and insights. But I guess this is the name of the game if you play around with this kind of commodity futures.

When I look at the hashrate over a longer period of time, it looks like a “Hodl” investment (see hashrate chart below).

Currently, we are at around 16.1 TH (terra hashes), and those futures have already started to move higher (the prices are from 8:45 am this morning):

BTC-HASH-2020Q3 –> 19.661
BTC-HASH-2020Q4 –> 19.450
BTC-HASH-2021Q1 –> 20.670

FTX: BTC-HASH-2020Q3

Aside from supply and demand, what are the factors that will move the prices of those futures? I believe it is the speed of technological development in the mining space. Each new mining device generation will increase the efficiency, and as a result the hashrate will go up. However, there is also a link to the price of BTC$. We saw this in the March 12/13 crash, which forced some miners to shut down, causing a drop in the hashrate.

It will be very interesting to observe if there is enough volume and open interest that flows into this product. In my opinion, the asymmetric information distribution might be one of the big hurdles for it.

But in terms of innovation, this is the way to go!

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