Opinion: Liquidity from CME Bitcoin futures drains into DeFi protocols

Total open interest in Bitcoin futures on the Chicago Mercantile Exchange (CME) since August 17 fell 64% from $948 million to $345 million — the lowest since May 4. According to Denis Vinokurov, an analyst at Bequant, this was the result of funds flowing into DeFi protocols, CoinDesk reports.

Open interest in CME Bitcoin futures. Source: Skew.

According to Skew, aggregate open interest in Bitcoin futures across all exchanges tracked by the portal’s data on derivatives fell by more than a third — from $5.7 billion to $3.6 billion.

According to DeFi Pulse, the total value locked in DeFi protocols stands at $10.8 billion. On August 17 the figure stood at $6.36 billion.

“Cryptocurrencies have gone into DeFi and yield farming, reducing the futures premium and making the carry trade unattractive to institutional investors,” Vinokurov said.

According to Skew, the futures premium — the spread between futures and spot prices on major exchanges — declined over the period from 12% to 2.5% and has since hovered around 7%.

Matthew Dibb, head of Stack Funds, a provider of cryptocurrency indexes, saw in this dynamic the impact of Bitcoin’s 7.5% price drop in September:

“The fall in Bitcoin’s price in September significantly affected short-term market sentiment. We expect open interest to fall below $3 billion — back to April levels.”

The total market value of Ethereum-based tokens pegged to the leading cryptocurrency stands at $1.37 billion, according to BTC on Ethereum. Since August 17 the number of wrapped bitcoins has more than tripled — from 40,422 to 127,622.

Leading the pack is Wrapped Bitcoin (WBTC) with a market capitalization of nearly $1 billion.

announced its relaunch.

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