U.S. Banks Profit from Bitcoin Futures Amidst Crypto Market Surge, Netting $1.4 Billion in Gains

Most U.S. banks can’t hold bitcoin directly. Still, they’ve found a way to profit from it. Data from the Commodity Futures Trading Commission (CFTC) shows that banks started buying bitcoin futures weeks before the recent presidential election.

They timed it well. Bitcoin jumped from $62,000 to nearly $90,000. According to the CFTC’s Commitment of Traders report from November 5, big banks took long positions worth $3 billion in bitcoin futures at the Chicago Mercantile Exchange (CME). This amounts to about 10,564 new contracts, which is equal to 52,820 BTC. It’s the most bullish stance banks have taken since the CME began offering bitcoin futures back in December 2017.

Even though SEC rules prevent broker-dealers from owning bitcoin outright, they can hold derivative products like futures and ETFs. With an average purchase price of $65,800 per contract, Forbes estimates banks could be sitting on a paper profit of around $1.4 billion, based on bitcoin’s recent high.

We don’t know the exact identities of the banks involved, as the CFTC doesn’t disclose that information. However, major broker-dealers like JP Morgan Securities, Goldman Sachs, and SG Americas Securities are likely players in this market.

A Forbes analysis of the latest futures trader report reveals that banks increased their open interest—money tied up in futures contracts—by $3.5 billion. This figure jumped from 1,200 bitcoin futures contracts (worth $373 million) on October 8 to 11,766 contracts (valued at $3.871 billion) a week later. With bitcoin just shy of $90,000 after Trump’s re-election, this position is now worth $5.3 billion, giving banks a floating profit of $1.4 billion, or 36%, in less than a month.

Additionally, Forbes estimates that banks raised their ethereum futures contracts from $35 million to $297 million (or $370 million at today’s prices) during the same period from October 15 to November 5. That’s another big win for them.

While the exact reasons for this surge in activity aren’t clear, it likely relates to expectations that the new crypto-friendly Trump administration will ease restrictions on digital assets and support sectors like bitcoin mining. Overall, the cryptocurrency market, valued at $3.2 trillion according to CoinGecko, has gained 37% in market value over the past four weeks. Bitcoin has risen 110% year-to-date, and even speculative tokens like Dogecoin have seen significant increases.

On a related note, the largest offshore institutional crypto derivatives marketplace, Dubai-regulated Deribit, is also experiencing record highs in open interest and options volume, with about $30 billion in open interest for bitcoin options contracts. Unlike futures, options give buyers the right, but not the obligation, to buy or sell an underlying asset like stocks or ETFs. CEO Luuk Strijers mentioned that institutions are actively trading spot ETFs like the iShares Bitcoin Trust ETF (IBIT). He noted that the current bitcoin options strike prices reflect a level of bullishness that wasn’t there before. The market is estimating a 31% chance that bitcoin will close at $100,000 this year.

Since November 2021, three main banking regulators—the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency—have discouraged banks from holding actual bitcoin on their balance sheets or providing crypto custody services.