Kalshi Ethereum Perpetual Futures Trading Volume 57% from Same Size Orders - CoinDesk

[Mexico City = Shim Young-jae, Correspondent] A significant portion of the trading volume for Bitcoin and Ethereum perpetual futures on the U.S. derivatives exchange Kalshi has been found to come from repeated orders of specific sizes. According to an analysis of publicly available trading data by CoinDesk, approximately $5,499 transactions accounted for 57% of the sample trading volume in Ethereum perpetual futures. In Bitcoin, transactions of around $2,500 and $5,000 made up 54% of the total sample.

According to CoinDesk, between the 17th and 20th (local time), of the $13.5 million in Ethereum perpetual futures traded on Kalshi, about $7.7 million came from repeated orders around the $5,499 mark. Similarly, more than half of the $8.5 million in Bitcoin analyzed during the same period was concentrated in two specific order sizes.

57% of Ethereum Trades Around $5,499

CoinDesk reported that on the 22nd, an analysis of Kalshi's publicly available application programming interface (API) data revealed that out of 3,450 Ethereum perpetual futures trades from the 17th to the 20th, 1,406 trades were concentrated within a $2 range around $5,499.

This trading volume amounted to approximately $7.7 million, which is 57% of the total Ethereum trading volume of $13.5 million analyzed by CoinDesk.

This pattern was not only observed over the four days. CoinDesk found that among 46 hourly samples surveyed from June 19 to September 20, 43 showed that Ethereum trades were concentrated in specific dollar amounts.

The most frequent trade size in each sample accounted for about 45% of the total trading volume. On 15 days, specific trade sizes exceeded half of the sample trading volume.

As Ethereum prices fluctuated, the number of contracts changed, but the dollar value of the trades remained relatively stable. CoinDesk explained that this pattern aligns with one or more automated trading programs that adjust the number of contracts based on a predetermined dollar amount.

Traders refer to these repeated order units based on a fixed nominal amount as 'clips.'

Kalshi is a derivatives exchange regulated by the U.S. Commodity Futures Trading Commission (CFTC). Known as a prediction market, it launched Bitcoin perpetual futures at the end of May. Perpetual futures are contracts without expiration that track the price of the underlying asset.

Kalshi's perpetual futures are divided into relatively small contract sizes. According to CoinDesk, on the 22nd, Ethereum-related contracts were trading at about $2.70 each.

The target amount for repeated trades remained almost constant despite changes in Ethereum prices. Ethereum prices rose from about $1,700 in June to $2,500 in September. Consequently, the number of contracts required for each trade continued to change.

In the July sample, each trade included about 2,800 contracts, but this decreased to about 2,200 contracts in September. However, the trade amounts themselves remained around the set levels.

From $4,999 to $5,499... Target Sizes Also Fluctuate

The benchmark amounts for repeated orders varied over time.

According to CoinDesk, in the initial samples, trading was concentrated around $4,999. On June 28, trades of around $9,999 accounted for 72% of the sample trading volume for that time frame.

Repeated trades of $3,999 were first confirmed on the 10th of last month. Subsequently, on the 18th of the same month, orders of $4,499 appeared, and from the 24th, orders of $5,499 began to appear repeatedly.

A similar pattern was observed about three weeks after Kalshi launched digital asset perpetual futures on June 19. At that time, trades close to $4,999 accounted for 37% of the total Ethereum contract trading volume analyzed by CoinDesk.

A similar phenomenon was observed in Bitcoin as well.

According to CoinDesk, in Bitcoin perpetual futures, two types of repeated trades of around $2,500 and $5,000 accounted for 54% of the $8.5 million trading volume analyzed from the 17th to the 20th.

These two trade sizes moved in tandem with changes in Bitcoin prices. The larger trades were almost exactly double the smaller trades.

Among the 22 samples where both order sizes appeared, in 9 cases, the number of contracts for the larger trades was exactly double that of the smaller trades. In the remaining 13 cases, the larger trades had one more contract than double the smaller trades. CoinDesk explained that this difference could be attributed to the rounding process.

When Bitcoin was trading at about $76,300, the two trades were 327 contracts and 655 contracts, respectively. On the 22nd, they were 307 contracts and 614 contracts, respectively.

Ethereum Trading Volume 61 Times Open Interest

In Ethereum perpetual futures, the trading volume was found to be significantly larger compared to the open positions.

According to CoinDesk, as of the 22nd, the 24-hour trading volume of Kalshi's Ethereum perpetual futures was approximately 93 million contracts. The open interest was about 1.5 million contracts.

The ratio of trading volume to open interest was 61. This means that for each contract held by traders, approximately 61 contracts were traded in a day. This was the second-highest figure among the 20 Kalshi perpetual futures with open interest. The median value among the 20 markets was about 8.

The ratio of trading volume to open interest for Bitcoin perpetual futures was 26. However, CoinDesk noted that a high turnover rate alone does not indicate inappropriate trading activity.

CoinDesk inquired whether the repeated Ethereum and Bitcoin trades observed on Kalshi originated from one or multiple traders. It also asked whether these traders were included in market-making or incentive programs and whether Kalshi had verified the possibility of self-execution between identical or jointly owned accounts.

Kalshi had not responded by the time of publication.

Similar to Automated Trading Patterns... Purpose Cannot Be Confirmed with Public Data Alone

CoinDesk explained that the repeated specific trade sizes typically appear in algorithmic strategies that recalculate the number of contracts based on a fixed dollar amount in response to price changes.

CoinDesk cited research related to algorithmic and high-frequency trading and the Avellaneda-Stoikov model, stating that automated trading programs can dynamically adjust order prices and contract sizes to manage price volatility risks.

The observed changes in trade sizes from around $4,999 to $3,999, $4,499, and $5,499 align with the possibility that the nominal trade sizes of the strategy were adjusted over time, according to CoinDesk.

However, it added that it cannot determine whether the trades are part of a normal trading strategy or activities aimed at obtaining trading incentives based solely on public order book data.

0.003% Fee Program Implemented from 16th

According to CoinDesk, a rebate program that allows some firms to significantly reduce costs when settling trades directly with Kalshi was implemented just before this analysis period.

This program, reported to the CFTC by Kalshi, took effect on the 16th. It reduces the trading fees for participating firms to 0.003% and provides the same percentage rebate to market makers. The program was implemented one day before the four-day sample period that CoinDesk focused on.

However, the repeated trades of $5,499 were confirmed about a month earlier, on August 24.

CoinDesk stated that, therefore, the rebate program alone cannot explain the start of the repeated order pattern. However, it noted that the program could influence the economics of subsequent trades.

Claims of Inflated Trading Volume... Kalshi Partially Refutes

There has also been controversy on social media regarding the repeated trading patterns.

According to CoinDesk, a pseudonymous trader named 'Beni' claimed over the weekend on X (formerly Twitter) that Kalshi inflated its digital asset trading volume by pointing out the repeated order sizes.

A representative from Kalshi, who operates under the name 'IcoBeast' as the head of the digital asset division, partially refuted some of Beni's claims.

He explained that the trading volume share chart cited by Beni represents prediction market trades, not perpetual futures.

Additionally, Kalshi does not pay rebates for digital asset prediction markets, and incentives provided by regulated exchanges must be publicly reported.

However, according to CoinDesk, this response did not clarify who was responsible for the repeated Ethereum perpetual futures trades. It also did not explain why the specific dollar benchmark amounts changed over time.

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