You may have seen futures products constantly making headlines last year in crypto websites. As the cryptocurrency space grows, we expect the market for futures to continue increasing quickly. For this reason, our team at IntoTheBlock has been working hard to provide you with all the analytics you need to understand and trade cryptocurrency futures. In these slides : - We will go over metrics and strategies used for futures in traditional markets, and how these can be combined with onchain analytics to create interesting insights for crypto futures. - We will cover the overall growth of crypto derivatives and allegations of how these can be used for market manipulation.

1. Rise of Crypto
Futures:
Traditional &
Onchain Analysis

2. Agenda
❖ Traditional Futures & Indicators
❖ Overview of Crypto Futures
❖ Applying Data Science to Crypto Futures
2

3. 33

4. 1
Traditional
Futures &
Indicators
4

5. Brief History of Futures
Contracts
What is a futures contract?
First contracts traded during the 17th century for
rice and agricultural goods (tulip mania and rice
exchange).
Later extended to metals in 19th century, and
beyond commodities in the late 20th century.
5

6. What are Futures used for?
Serving demand to:
▸ Be able to profit from an asset without holding it
▸ Hedge your risk against price movement
▸ Get access to hard-to-trade assets
Cash-settled vs Physically-settled
Current State: Futures volume > Spot volume
6

7. Traditional Futures Indicators
▸ Futures price - Agreed upon price for buyer/sellers to transact at the settlement date
▸ Volume - # of contracts traded (usually per day); $ amount traded
▸ Open Interest - # of outstanding contracts (open positions), both long and short
7
If the first trader to trade a futures contract purchases 10 contracts,
And later closes 3 contract, the trader is now long 7 contracts
If a different trader sells 4 contracts, the first trader is still long 7 contracts,
And the second trader is short 4.
Volume Open Interest
7
10
13
10
7
17 11

8. Traditional Futures Indicators
▸ Contango - Futures price >
Index (spot) price
▸ Backwardation - Index price >
Futures price
▸ Basis - Difference between
index price and futures price
▸ Turnover - Volume/OI
8

9. 2
Crypto
Futures
9

10. Growth & Institutionalization
BitMex launch 2014; CBOE, CME
launch 2017
“We will tame Bitcoin” - CME
Chairman, Leo Melamed
2018 as an inflection point for futures
(2x-6x increase in volume)
10

11. 2019 - Crypto exchanges join the party
Bitfinex (January),
Kraken (March),
Binance (September)
11

12. Crypto Futures Contracts
Mostly cash-settled, Bakkt an
exception
High leverage, high risk
Conventional contracts with
expiration (settlement) dates
12

13. Enter Perpetual Swaps
No expiry date
Prices are “pushed” towards spot prices
through the funding rate
Fee charged to long/short holders
depending if prices are at a
premium/discount
13

14. Funding Rate
Funding rate is a function of the
perpetual swaps’ premium
(discount) and the exchange’s
interest rate
Indicates market positioning
Charged every 8 hours
14

15. Non-Regulated vs Regulated Futures
Volume, OI differences:
15
Volume Open Interest
BitMex PS to CME
Frontrunning:
6.05x 8.04x
Bitmex to CME March
Futures
4.95x 3.82x
Volume as a function of leverage
▸ CME Bitcoin Maintenance Margin: 70% (0.7 BTC to buy 1BTC)
▸ BitMex Maintenance Margin: 1% (0.01 BTC to buy 1 BTC)

16. 3
Applying
Data Science
to Crypto
Futures
16

17. Introduction to ITB Futures
Applying the ITB framework to futures and perpetual swaps:
▸ Data Science - gathering, analyzing and displaying futures
▸ Machine Learning - building and testing predictive signals
▸ Onchain Analytics - assessing the impact of onchain indicators on futures indicators
and viceversa
17
More sophisticated
futures analytics
Metrics combining
blockchain info with
futures data
Indicators tailored to the
nature of Crypto futures
17

18. Contango/Backwardation
▸ Analyzing changes in the
basis of futures contracts
considering if the asset is
currently in contango or
backwardation
▸ Applying ML to create a
bullish/bearish signal based
on how spot and future
prices converge/diverge
18

19. Futures Market Momentum
▸ Combining futures price, volume and open interest to create a signal of momentum
in the futures market
▸ Testing for predictivity and adjusting bull/neutral/bear thresholds
19
Price Trend Volume Open Interest Market Momentum
Rising Up Up Strong Bullish
Rising Down Down Weak Bullish
Declining Up Up Strong Bearish
Declining Down Down Weak Bearish
19

20. Futures Dominance
▸ As futures (and derivatives in general) increase in adoption, we
believe there should be a metric to track their “market share”
▸ Futures dominance consists of the ratio of the total volume traded
for all futures contracts of a token over the total volume for the
underlying token
▸ Futures dominance could serve as a proxy for institutional
adoption
20

21. Weighted Funding Rate
▸ Perpetual Swaps’ funding rate can act as an indicator of the
short-term bias of contract holders and has been a leading
indicator in recent trend changes
▸ The weighted funding rate provides an aggregated value,
weighing each contract’s rate by its open interest
▸ Can be used either as a signal or indicator
21

22. Combining Onchain & Futures Analytics
Can provide insights into:
▸ Miner Behavior
▸ Trader Behavior
▸ Market Manipulation
▸ Other interesting patterns users might discover
22

23. Mining vs Futures Analytics
▸ Futures are used by
miners to hedge their
positions and revenues
▸ Look out for a spike in
OI and Volume as the
halving approaches
23
Time
MiningRevenues
FuturesOpenInterest

24. In/Out of The Money vs Open Interest
▸ Amount to be settled by expiration (OI for Futures)
▸ Out of the Money resistance at futures price
2424

25. Market Manipulation
How is it done?
Is there constant market manipulation?
Onchain factors that could reflect manipulation:
▸ Large transactions
▸ Concentration (accumulation or reduction)
25

26. Other Indicators Considered
▸ Futures price range
▸ Index (Spot) Price
▸ Volume
▸ Open Interest
▸ Turnover
▸ Settlement Date (w/ onchain comparisons)
▸ Funding Rate
▸ Basis
▸ Future Network Value Ratio
▸ Projected Daily Price Return
▸ Annualized % Return
26

27. Futures & Perpetual Swaps Launch
Launch by end of Q1
Including most of the indicators mentioned
Major exchanges by volume
P.S. Make sure to refresh CoinMarketCap in a couple of hours
27

28. 2828

29. INTRODUCING
CONTACT INFORMATION
Lucas Outumuro
Senior Analyst
loutumoro@intotheblock.io
Thank you! Any questions?