Recent analysis by CoinDesk indicates that a specific trading pattern has emerged in the bitcoin and ether perpetual markets on Kalshi, with a notable concentration of trades around fixed dollar amounts.

Key Findings from the Analysis

  • A single trade size of $5,499 accounted for approximately 57% of the total ether perpetual volume analyzed by CoinDesk, which totaled $7.7 million from September 17 to September 20.
  • In the bitcoin market, recurring trade sizes of around $2,500 and $5,000 constituted 54% of the sampled volume, which was $8.5 million during the same timeframe.
  • The observation of these fixed-dollar trades appeared over 43 out of 46 sampled dates since June, suggesting possible automated trading practices and raising concerns about market activity being influenced by a limited number of participants.

CoinDesk's examination of Kalshi's public trade records reveals that a small number of repeated trade sizes dominated the market activity for both bitcoin and ether perpetual futures. In the ether market, trades clustered closely around $5,499, contributing significantly to the total transaction volume observed.

The data showed that the ether trades comprised 57% of the total $13.5 million in transactions analyzed, while the bitcoin trades indicated a similar trend with two common trade sizes making up a substantial portion of the activity.

Volume is a crucial metric for traders assessing market liquidity, as it reflects whether they can execute trades without significantly impacting prices. A high volume can suggest a vibrant market, but if much of that volume comes from a few repetitive trade sizes, it raises questions about the nature of that activity.

For instance, in a situation where a stock reports a high volume of trading, it could imply robust buyer and seller interest. However, if a significant part of that volume results from a limited number of trades, it is essential to understand the underlying factors driving that activity.

Significant trade sizes characterized the ether market on Kalshi. (Getty)

This unusual trading behavior has been consistent over time, with the CoinDesk analysis showing that for 43 of the 46 one-hour samples taken from June 19 to September 20, ether trades consistently clustered around specific dollar amounts. The dominant trade size represented around 45% of the value across these samples.

As the price of ether fluctuated, the number of contracts involved in these trades changed, but the dollar value remained relatively fixed, indicating potential use of automated trading strategies.

Kalshi, a U.S. derivatives exchange overseen by the Commodity Futures Trading Commission, is recognized for its prediction markets and recently incorporated bitcoin perpetual futures.

Insights from the Data

Kalshi segments exposure into smaller contracts that traded around $2.70 each, and CoinDesk analyzed 3,450 ether-perpetual trades during the four-day sampling period. Out of these, 1,406 trades were within $2 of the $5,499 target.

This recurring target remained stable despite changes in the number of contracts needed to achieve it as ether's price evolved. For example, as ether prices rose from approximately $1,700 to $2,500 between June and September, the number of contracts per trade adjusted accordingly.

Initially, trades were clustered around $4,999, but the target shifted to $3,999, $4,499, and then $5,499 over time, indicating adjustments in the trading strategy.

Bitcoin reflected a similar pattern, where two recurring trade sizes moved in sync with price changes, maintaining a consistent ratio between them.

Bitcoin trades on Kalshi often showcased a doubling pattern. (Shaurya Malwa/CoinDesk)

Kalshi's ether perpetual market demonstrated an exceptionally high trading volume compared to the open positions. A snapshot indicated a volume-to-open interest ratio of 61, suggesting a high turnover of contracts.

CoinDesk reached out to Kalshi to inquire about the participants behind these repetitive trade sizes and whether any of these trades were influenced by market-making arrangements. However, no response was received by the time of publication.

Such recurring trade sizes are often indicative of algorithmic trading strategies targeting fixed dollar amounts.

Concerns from Critics

There are growing concerns regarding the trading dynamics on Kalshi, especially after a rebate program was introduced that significantly reduced fees for certain firms. This rebate program, effective September 16, coincided with the emergence of the $5,499 trades, although it does not account for their initial appearance.

A trader using the pseudonym ‘Beni’ has raised alarms about these repetitive trade sizes, suggesting that they artificially inflate Kalshi's reported trading volume. Kalshi's crypto head responded, disputing some of Beni’s claims and clarifying that the volume-share chart referenced did not pertain to perpetual futures.

Nonetheless, the response did not address the source of the repeated ether-perpetual trades or the reasons for the changing fixed dollar amounts over time.