Cryptocurrency exchange FTX has launched eight unique index futures and volatility markets in less than 12 months. But enticing sophisticated traders to use these novel products has proved challenging.
At the time of publication, Antigua and Barbuda-based FTX supports 115 different cryptocurrency futures markets. BitMEX, currently the largest cryptocurrency derivatives exchange by open interest, supports 23. FTX’s unique futures markets, including and “” perpetual futures, rank in its top 25 traded markets by 24-hour volume.
Since August 2019, when FTX launched its altcoin index futures, the product strategy for these innovative markets has been to build and launch rapidly to capitalize on trends within cryptocurrency communities. “A lot of these products are really important to launch while popular,” said CEO Sam Bankman-Fried.
The ostensible popularity of these indices’ underlying assets, however, hasn’t always translated into equivalent demand from professional traders to enter the new markets. In fact, these indices report a tiny fraction of the trading volume for FTX’s and futures markets. A one-week average of daily trading volume for FTX’s top indices shows none of them broke above even $4 million in traded volume.
“Each of these new products are fascinating and potentially very attractive hedging instruments in the future,” said Jeff Dorman, the chief investment officer at Arca. But at present, larger investors may be precluded from “fully utilizing” FTX’s innovative products due to “low liquidity and low underlying AUM per product.”
“With that said, if FTX is able to continue growing its user base and onboards more market makers, liquidity will naturally flow towards these products and funds will follow,” Dorman added.
FTX’s unique futures markets are designed for both retail speculators and professional traders, according to Bankman-Fried. But to some traders, the exchange appears to be primarily designed for professional algorithmic and quantitative traders.