coindesk.com
Happy Wednesday,
This is your institutional newsletter, Crypto Long & Short. This week:
- Andy Baehr of GSR on what perpetual futures have in common with football and baseball
- Top headlines institutions should pay attention to by Francisco Rodrigues
- “Tokenized assets are growing on a flat stablecoin base” in Chart of the Week
Thanks for joining us!
- Kim Klemballa
Why ICE's Hyperliquid deal is a retail play
by Andy Baehr, managing director, asset management, GSR
(American) football and baseball captivate fans with a series of discrete events. Each one builds suspense and delivers a reward, then the game resets. Soccer, basketball, hockey and racing work the other way. You watch the clock or the laps tick down; the drama happens when it happens.
When it comes to financial markets, retail traders seem more and more interested in a football/baseball experience, where discrete events produce outcomes soon. Academics call the pull of uncertain, frequent rewards “variable-ratio reinforcement.” The rest of us call it dopamine.
The explosive rise of prediction markets is the clearest example. Kalshi just posted its biggest month on record, with roughly $98 billion in contract volume in October. Same-day expiring options, known as “0DTE,” are another. Cash-settled S&P 500 options on Cboe, a chunky institutional product, are now dominated by 0DTE, which accounted for two-thirds of volume in July. Cboe estimates that half of that is retail.
The argument can be made that perpetual contracts, or perps, popularized by crypto exchanges over the last decade (and, some feel, one of crypto's greatest contributions to finance) fit in the same bucket. The user commits some collateral and puts on a trade. Either the trader takes a profit or, if the market moves far enough the wrong way, the position is liquidated. Liquidation carries no stigma and, usually, no further penalty; insurance funds and other backstops absorb most shortfalls. The exchange invites the customer to trade again.
On Oct. 29, Intercontinental Exchange (ICE) and Trade[XYZ], a leading deployer of real-world-asset perps on Hyperliquid (a large decentralized perp exchange), agreed to bring those markets onshore in the U.S. ICE will be the exclusive operator of Trade[XYZ]'s regulated markets and take a strategic stake. Stan Druckenmiller used his first-ever post on X to say he is “excited to be an investor in tradeXYZ$87.45.” Hyperliquid's HYPE token rose about 20% that day, and the deal drew wide and persistent coverage.
