Binance’s crypto derivatives platform Binance Futures continues to soar in popularity as more and retail customers add fuel to the bull run. Open interest on the derivatives platform hit a record high of over $10 billion on Saturday, amounting to YOY growth of nearly 3,900%.
Binance Futures were launched in September 2019 with a single tether (USDT)-margined perpetual futures for bitcoin.Since then the derivatives platform has expanded their offerings. With this expansion has come criticism by the US government. Binance Probed by CFTC Over Whether U.S. Residents Traded
Binance is being investigated by the Commodity Futures Trading Commission over concerns that it allowed Americans to place wagers that violated U.S. rules, according to people familiar with the matter. The CFTC is seeking to determine whether Binance, which isn’t registered with the agency, permitted U.S. residents to buy and sell derivatives that the regulator polices, said the people, who asked not to be identified because the probe is confidential. Binance, which has an office in Singapore but says it lacks a single corporate headquarters, hasn’t been accused of misconduct and the investigation may not lead to an enforcement action. The scrutiny is the latest sign that market watchdogs may thwart the crypto industry’s ambitions of becoming more mainstream for U.S. investors. The CFTC considers virtual currencies like Bitcoin and Ether to be commodities and claims jurisdiction over their futures and other derivatives. That means crypto platforms face strict customer protection and oversight demands if Americans are trading on them -- regardless of where exchanges are based.
This probe has not stopped the growth and as a US based trader I'm disappointed that I can't trade in the futures market. Binance is synonymous with retail traders and Intuitional traders are taking advantage of the new markets with their own derivates, but many of us don't have the same access which actually puts us at a disadvantage which the CFTC probe should realize they are hurting US customers restricting Binance and other plaforms that offer these services.
We have few or non US approved platforms that have opportunities for shorting assets. In this bull run it has been not too bad, but when the bear market comes it would be nice to be able to trade bearish strategies. In a down market, you could go months without snagging any trades void of shorting capabilities. This essentially limits your trading opportunities. Another problem is the situation around exchange fees which are outrageous compared to OUS exchanges. US exchanges charge high trading fees, making it very difficult to profit on small price moves AKA scalping. Derivatives could help with this type of trading strategies, but overall the lack of exchanges and options is hurting customers.
For perspective, Binance is the largest bitcoin futures exchange by open interest at approx. contributing $4.33 billion, or 18.44% of the global tally of approx. $23.48. This shows you the market is growing and it's the obvious that there's a wealth concentration out of the US so I think the next step for US markets will be the allowance of derivatives just like with stocks. I'm hoping that the SEC will be more crypto friendly and open up market access to US customers. I'm not one to use a VPN so I'm hopeful that we will get a 'free market' for exchanges as adoption progresses. I know there is hesitation from these exchanges to register as brokers in the US, but if they wanted to get into our markets I think that is the first step to allow derivate markets. I'll be interested to see what next few months hold as the bull markets continues and SEC changes guard. Maybe they will allow these players to enter our market or maybe the US exchanges will make their own derivatives markets. Only time will tell.