Bitcoin sees massive capital inflows in crypto futures

The information was released by CoinShares, a European company that specializes in digital assets and has already released a number of cryptocurrency derivatives, in an official blog post yesterday. With a concentration on Bitcoin, net capital inflows during the last four weeks were $742 million. With $137 million in inflows just last week, this was the largest set of inflows since the fourth quarter of 2021.

All of this happened when BlackRock’s application to launch a spot Bitcoin ETF became public knowledge, which led to a spike in the price of BTC to over $30,000.

What cryptocurrency derivatives are available?

The data above refer to those derivatives that are traded on regular exchanges, in addition to conventional futures contracts and options, which can also be found on cryptocurrency exchanges.

These mostly consist of securities like the Grayscale Bitcoin Trust (GBTC) or funds like ETFs, ETNs, or ETPs.

They are financial derivative instruments that let investors utilize the traditional trading platforms they now use to transact in the stock market to speculate on the price of Bitcoin and other cryptocurrencies.

These are therefore targeted at a group of people who often do not trade on cryptocurrency markets.

Products from 21Shares, Pro Shares, Purpose, and other companies are also listed, in addition to those from Grayscale and CoinShares.

Many of these are accessible through exchanges in Europe, while others are accessible through exchanges in the US or Canada.

According to the aggregate data, these items have received a total of $137 million in net capital during the last seven days and $276 million over the last thirty days. The entire influx since the year’s commencement has been close to $500 million.

When compared, for example, to the daily trading volumes of derivatives on cryptocurrency exchanges, these figures are not inflated, but in this case, they represent net capital inflows rather than trade volumes.

The aforementioned data is nevertheless important because, over the same time period, net inflows of BTC and tokens on crypto exchanges are at their lowest level since 2023.

Altcoins and Bitcoin

The data pertaining to the cryptocurrencies that have experienced the most inflows into their derivatives, however, may be the most intriguing.

In actuality, $571 million has been invested in BTC derivatives on conventional exchanges since the year’s commencement, $277 million during the past 30 days, and $140 million over the past seven days.

These figures are substantially higher than the overall figures because inflows on other cryptocurrency futures, including those on ETH (Ethereum) or ADA (Cardano), have actually been negative.

In other words, practically all of these inflows have been focused purely on Bitcoin derivatives.

Although it is not at all surprising that traditional investors are primarily interested in Bitcoin, it is likely that this trend will reverse slightly as a result of last week’s momentous New York court verdict on XRP.

The point is that they likely understand it far better than they do alternative cryptocurrencies because they now acknowledge that it plays a distinct role in the global financial system, namely serving as a safeguard against any too expansive monetary policies of central banks.

Interestingly, inflows to futures that are shorting the price of BTC have also been negative, demonstrating that even conventional markets do not anticipate a decline in the price of Bitcoin in the near or medium term.

Bitcoin: the exchanges’ performance with conventional crypto derivatives

Despite the fact that the aforementioned figures do not seem impressive, 2023 is nevertheless shaping up to be a highly successful year for these products.

While derivatives have long drawn investors and speculators to crypto exchanges, regular exchanges only seem to be seeing a recent surge in interest in crypto derivatives.

With a total of $2.3 billion last week on traditional exchanges alone, trade volumes on digital asset investment products are currently still far above the industry average.

Additionally, the US and Canada saw the vast bulk of inflows, while European markets remained calmer in this regard.

All of this is in spite of the US SEC’s blatant opposition to altcoins and cryptocurrency exchanges.

In fact, it’s possible that the war has actually favored Bitcoin against altcoins and this specific class of derivatives, which are traded on standard exchanges rather than crypto exchanges.

All of these numbers have the potential to increase significantly should the SEC approve an ETF like the one suggested by BlackRock, making Bitcoin a significant player on conventional markets as well.