Crypto exchanges are starting to take on a new role: pricing traditional assets while Wall Street is closed.
The growing market for perpetual futures contracts tied to traditional financial instruments including commodities like gold and oil that runs around the clock on cryptocurrency exchanges is responsible.
Data from Binance Research suggests these markets, which hit $31 billion in weekly trading volume on commodities volatility, are doing more than filling idle hours. Weekend price moves in gold-linked perps correctly predict the direction of Monday’s opening in traditional futures about 89% of the time, Binance found. The correlation between the two sits near 0.80, indicating a strong relationship.
The report finds a median “capture ratio” of 57%, meaning more than half of the expected move is already reflected in crypto markets before traditional exchanges open.
The extreme volatility seen over the war in Iran serves as an example. As tensions rose over the weekend of February 28 to March 1, trading volume in these contracts surged to $8.1 billion, far above typical levels. Traders used the market to hedge and react in real time while traditional venues were closed.
Weekend activity has grown steadily over the past month as volumes now average about 38% of weekday levels, according to Binance’s data.
“While the magnitude of price discovery still has room for improvement, directional accuracy is already compelling,” the firm wrote. “Weekend perpetual price movements correctly predict the direction of Monday’s opening gap 89% of the time. For traders seeking to position ahead of Monday’s open or manage weekend risk, this level of directional reliability makes TradFi-perps a valuable signal source.”
These products also offer other advantages by bringing financial instruments that would otherwise have forced crypto holders to off-ramp to access directly into their platfforms.
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