Unusual Trading Patterns in Bitcoin and Ether Perpetual Markets on Kalshi

Recent analysis has unveiled a distinctive trading phenomenon within the bitcoin and ether perpetual markets on Kalshi, highlighted by a significant prevalence of trades centered around specific dollar amounts.

Analysis Highlights

• In the ether perpetual market, a single trade size of $5,499 accounted for nearly 57% of the total trading volume, which reached $7.7 million from September 17 to September 20.
• For bitcoin, recurring trade amounts of approximately $2,500 and $5,000 made up 54% of the total $8.5 million in volume during the same period.
• This pattern of fixed-dollar trades has been observed on 43 out of 46 sampled days since June, suggesting potential automated trading practices and raising concerns about limited participant influence on the market.

CoinDesk's review of Kalshi's public trade data shows that a small set of repeated trade sizes has dominated activities in both bitcoin and ether perpetual futures. Notably, ether trades clustered around $5,499, significantly impacting the overall transaction volume.

Ether trades accounted for 57% of the total $13.5 million in transactions analyzed, with bitcoin trades reflecting a similar pattern where two common sizes comprised a substantial share of the activity. The volume is crucial for assessing market liquidity, as it indicates the ability to execute trades without significantly affecting prices.

High trading volume can imply robust market interest, but if a large portion results from a limited number of trade sizes, it raises questions about the integrity of that activity.

CoinDesk's findings revealed that from June 19 to September 20, ether trades consistently clustered around specific dollar amounts during 43 of the 46 analyzed one-hour samples. One dominant trade size represented about 45% of the total value in these samples.

As ether prices fluctuated, the number of contracts in these trades varied, yet the dollar value remained relatively constant, suggesting the possible use of automated trading strategies.

Kalshi, a U.S. derivatives exchange regulated by the Commodity Futures Trading Commission, is known for its prediction markets and has recently added bitcoin perpetual futures.

Data Insights

Kalshi's structure allows for smaller contracts, trading around $2.70 each. CoinDesk's analysis covered 3,450 ether perpetual trades within a four-day window, with 1,406 of these trades falling within $2 of the $5,499 mark.

This target remained stable despite fluctuations in the number of contracts needed as ether's price changed. Initially, trades clustered around $4,999 before shifting to $3,999, $4,499, and eventually $5,499, indicating a possible adjustment in trading strategies.

Bitcoin exhibited a similar trend, with two recurring trade sizes moving in tandem with price changes, maintaining a consistent ratio.

Kalshi's ether perpetual market showed an exceptionally high volume-to-open interest ratio of 61, indicating a rapid turnover of contracts. CoinDesk attempted to contact Kalshi for insights on the participants behind these trades and any market-making influences, but received no response by publication time.

These recurring trade sizes often signal algorithmic trading strategies targeting fixed dollar amounts.

Criticism and Concerns

Critics are increasingly wary of trading dynamics on Kalshi, particularly following the introduction of a rebate program that notably reduced fees for select firms. This program, which began on September 16, coincided with the rise of the $5,499 trades, though it does not explain their initial emergence.

A trader known as ‘Beni’ has voiced concerns that these repetitive trade sizes could artificially inflate Kalshi's reported trading volume. While Kalshi's crypto head disputed some of Beni’s assertions, the response did not clarify the origins of the repeated ether-perpetual trades or the reasons behind the evolving fixed dollar amounts over time.