The past few weeks have seen significant capital inflows toward crypto derivatives on exchanges, particularly on Bitcoin.
The data were published yesterday in an official blog post by CoinShares, a European company specializing in digital assets that has already issued several crypto derivatives.
Specifically, net capital inflows over the past four weeks totaled $742 million, with a focus on Bitcoin.
This was the largest set of inflows since the last quarter of 2021, with $137 million last week alone.
All of this followed the news of BlackRock‘s application to issue a spot Bitcoin ETF, and subsequent rise in the price of BTC above $30,000.
What crypto derivatives exist in the market
In addition to classic futures contracts and options, which can also be found on crypto exchanges, the data here refer to those derivatives that are traded on traditional exchanges.
These are mainly funds, such as ETFs, ETNs or ETPs, or securities such as the Grayscale Bitcoin Trust (GBTC).
They are derivative financial products that allow investors to take a position on the price of Bitcoin and cryptocurrencies using the classic platforms they already use to trade in the stock market.
Hence, these are intended for a target audience that generally does not trade in crypto markets.
In addition to products from CoinShares and Grayscale, also included are those from 21Shares, Pro Shares, Purpose and others.
Many of these are available on European exchanges, while others are available on US or Canadian exchanges.
The overall figures say that a total of $137 million in net capital has flowed into these products over the past seven days, while $276 million has come in over the past 30 days. Since the beginning of the year, the total inflow has been nearly half a billion dollars.
These are not exaggerated numbers when compared for instance with the daily trading volumes of derivatives on crypto exchanges, but in this case these are net capital inflows, not trading volumes.
Moreover, over the same period, net inflows of BTC and tokens on crypto exchanges are at their lowest since 2023, so the above figure remains significant.
Bitcoin and altcoins
However, perhaps the most interesting figure is that concerning the cryptocurrencies that have seen the largest inflows on their derivatives.
Indeed, $140 million has flowed into BTC derivatives on traditional exchanges in the last seven days, $277 million in the last 30, and $571 million since the beginning of the year.
These numbers are actually even greater than the overall numbers because on other crypto derivatives, such as those on ETH (Ethereum) or ADA (Cardano) the inflows have turned out to be even negative.
Basically almost all of these inflows have been concentrated solely and exclusively on Bitcoin derivatives.
However, it is possible that with last week’s historical New York court decision on XRP, this trend may possibly change a bit, although it is actually not at all surprising that traditional investors are primarily interested in Bitcoin.
The point is that they probably understand it much better than they do altcoins, since they now recognize it as having a clear role within the global financial system, namely that of protection against any overly expansive monetary policies of central banks.
Incidentally, inflows to derivatives that are shorting the price of BTC have also been negative, which rather clearly indicates that even traditional markets do not expect the price of Bitcoin to fall in the short or medium term.
Bitcoin: the success of traditional crypto derivatives on exchanges
Although the above numbers do not appear resounding, 2023 is still turning out to be a very successful year for these products.
While on crypto exchanges derivatives have been attracting investors, and especially speculators, for many years now, crypto derivatives on traditional exchanges seem to be really taking off only now.
Indeed, at this time trading volumes on digital asset investment products remain well above average, with a total of $2.3 billion last week on traditional exchanges alone.
In addition, the vast majority of inflows were in the US and Canada, while European markets remained quieter in this respect.
All this is despite the US SEC’s outright fight against altcoins and crypto exchanges.
In fact, perhaps that battle has actually favored this particular type of derivatives, which are not traded on crypto exchanges but on traditional exchanges, and Bitcoin over altcoins.
Should the SEC approve an ETF like the one proposed by BlackRock all of these numbers have the potential to grow a lot more as a whole, and make Bitcoin a major player on traditional exchanges as well.