13 September 2021

Market commentary: More professionals play the arbitrage game

Daniel Kukan

Daniel Kukan

Senior Trader bei Crypto Finance (Brokerage) AG

Über den Autor

Another regulatory storm shook the crypto market last week, as if the crypto space was not under constant regulatory pressure globally already. The overall market calmed down for a short period over the weekend, and some altcoins (e.g. ATOM and XTZ) continued their slow recovery from last week’s lows. The spread between ETH and BTC also recovered and is currently trading at around 0.073. BTC$ is again trading in the last range between 44,000 and 52,000, not so far away from the important 40,000 support mark.

ETH$ seems to have a stronger support between 3,000 and 3,200, and short-term resistance at 4,000. The derivatives premium has actually not changed a great deal, and is still trading within a healthy (and not too overly stretched) region. One should not forget the quarterly upcoming September derivatives expiry, expecting a massive $4bn worth of options set to expire on Deribit soon. Prior to the sell-off, which we saw last week, will most likely be a rich derivatives premium in perpetual and term futures, as well as high spiking short-term volatility, which was not exactly the case this time. Anyway… as crypto in general has been seeing increased adoption over the last couple of months, speculative and investment money has also entered the market in great volume, and, therefore has automatically become more liquid on a daily basis.

Excesses in derivatives premiums seem to belong to the history as more professionals play the arbitrage game between the spot and any kind of futures or synthetic forwards. To see insane premiums and even discounts again will definitively require a more distracted market. Maybe a general financial short-term collapse/sell-off will cause a chaotic situation as we saw in numerous occasions until 2020. Crypto has definitively grown up and the margin pressure keeps on going.

Europe’s largest futures and options exchange, EUREX, announced to launch and list Bitcoin ETN Futures starting on September 13th (today). The futures contract is based on ETC Group’s BTC etc, which is listed on the Frankfurt Stock Exchange and has been one of the most heavily traded ETF/ETN contracts on the German exchange, Deutsche Börse XETRA, since its launch in June 2020. The new futures contract will be traded in euro, and physically delivered in BTCE, which is fully backed by bitcoin and investors can redeem it for the underlying bitcoin.

More and more traditional financial global banks are getting involved in crypto as the rapidly growing institutional interest in digital assets has become unstoppable. Standard Chartered initiated a research report covering crypto assets.

See investment guides for Bitcoin & Ethereum here: