Traders Buy Oil Futures With Crypto Amid Record Volatility

The Binance-owned crypto derivatives exchange, FTX, has introduced oil futures following the recent record crash in U.S. oil prices — which fell as low as minus-$40 on April 20.

FTX’s contracts will expire at the spot price of West Texas Intermediate, or WTI, plus $100 to protect against negative settlement prices.

The exchange notes that should the spot price of oil fall below minus-$100, “FTX OIL contracts “can theoretically expire negative.”

FTX launches crypto-based oil contract trading

FTX comprises a top-10 ranked Bitcoin (BTC) futures exchange by both volume and open interest. The Binance-owned exchange is the largest to offer crypto-based oil contract trading. 

The contracts are not available to account-holders residing in or with an IP address in the United States, Canada, or a number of other verboten locations.

Oil’s volatility dwarfs cryptocurrencies

Despite being known for their volatility, cryptocurrencies have paled in comparison to the price swings posted by WTI since March.

Volatility of Oil, Bitcoin, and Gold: Woobull

The contracts will trade until settlement, even if they are settled after the expiration date has expired.

Derivative volumes spike in 2020

The first quarter of 2020 saw record trade volume posted by the crypto derivatives sector, driven by new market entrants, Binance and FTX.

A report published by CryptoCompare earlier this month estimated that the combined market share of Binance and FTX grew from 14% in January to 22% in March amid the dramatic crypto market crash.

Binance saw the largest volume among derivatives exchanges, with $2.8 billion in futures contracts changing hands during the violent sell-off.