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Hi all, happy Wednesday!
Today, we're tracking a massive structural realignment in crypto market dynamics. While bitcoin faces a distinct slow bleed, reversing April’s institutional setup with $2B in global ETF outflows, the structural plumbing behind derivatives is moving at breakneck speed. The CFTC's recent clearance of its first regulated onshore bitcoin perpetuals, combined with CME Group's transition to a 24/7 trading schedule, effectively weakens the offshore regulatory arbitrage and the traditional weekend gap.
BTC closed near $66,000 yesterday. May reversed April's institutional setup across the board. ETFs saw ~$2B in global outflows, snapping a two-month positive streak and erasing March–April's ~$4B of inflows.
Treasury company purchases halved to ~$2B, still well off mid-2025 highs, still concentrated in Strategy.
Whale balances are contracting year-over-year at the fastest pace of 2026.
CME open interest gave back its April gain, falling ~20% to $7B.
All this while BTC's correlation profile in May offered little comfort. For most of the month, BTC tracked SPY and QQQ in the 0.4–0.6 range, behaving squarely as a risk asset, but as late-month selling accelerated, correlations to equities and gold alike collapsed toward zero. That outcome is arguably the worst-case framing for cross-asset portfolio construction. BTC drew down without the cover of macro contagion, stripping out the diversification benefits that would justify an allocation increase.
How the asset behaves through the next risk-off episode will weigh heavily on how institutions size it heading into H2 2026.
— Marc
TradFi Playing Keep Up
The CFTC approved KalshiEX's BTCPERP (the first bitcoin perpetual cleared on a CFTC-registered exchange) and, in a parallel no-action letter, let Coinbase route US customers into offshore perps and options through its Bermuda affiliate, Deribit. The same day, CME Group's crypto futures and options went live on a 24/7 schedule.
Perpetuals and continuous trading were the two features that kept derivatives flow offshore. Both now have a regulated onshore home.
The perp approval is the bigger event. As we know, perps are the dominant crypto derivative globally; centralized venues cleared roughly $86T in 2025, up about 47% YoY. Until last week, none of that was reachable through a CFTC-regulated venue. Kalshi's BTCPERP references spot BTC via the CF Benchmarks BRTI with eight-hour funding, a structure desks already know from running the same trade abroad. The Coinbase side is narrower as it allows regulated access to offshore liquidity rather than a domestic contract, but it still widens the onramp materially.
CME's move closes the other gap. With futures and options now trading continuously (two-hour Saturday maintenance window aside), the weekend CME gap that traders built strategies around is effectively retiring. Weekend and holiday prints still carry next-business-day settlement, and thin liquidity around the maintenance reopen may preserve some of the old character. Something worth watching over the first few weekends.
For institutions constrained to regulated venues, the menu just expanded sharply, and the regulatory-arbitrage case for trading crypto derivatives offshore got materially weaker.
— Marc
Perps are rapidly evolving from a crypto-native innovation into a dominant global trading instrument, offering continuous 24/7 liquidity, simplified risk management, and no expiry dates compared to traditional dated futures. At the forefront of this shift is Hyperliquid, the largest decentralized perpetuals exchange, which currently generates $800 million in annualized revenue and handles over $250 billion in monthly volume. By expanding beyond digital assets into commodities, equities, and pre-IPO markets, Hyperliquid is advancing its vision to "house all of finance" on a single on-chain venue. This rapid growth, coupled with recent CFTC regulatory developments opening the door for U.S. regulated crypto perps, has increasingly positioned on-chain infrastructure as a formidable, always-on competitive threat to legacy Wall Street giants like ICE and CME.
May reversed most of the institutional tailwinds that drove April's setup. ETF flows turned negative with ~$2B in global outflows while treasury company purchases halved to ~$2B. CME open interest gave back the prior month's gain, falling ~20% to $7B and erasing April's expansion. CFTC's clearance of US-regulated BTC perpetuals ends offshore venues' dominance and materially expands onshore institutional access; CME's pending June launch of cash-settled Bitcoin Volatility futures (BVX) gives US risk desks an isolated implied-vol tool they previously lacked, and CME has transitioned crypto futures and options to 24/7 trading.
