Crypto Traders Face Hurdles in Executing Vertical Spreads Amid Surging Institutional Spot Bids on Binance

Crypto traders are encountering increasing difficulties in effectively executing "vertical moves," a common options trading strategy, primarily due to the substantial spot bid activity from institutional treasury corporations on platforms like Binance. This market dynamic highlights a growing sophistication in the crypto landscape, where large-scale institutional participation is reshaping trading conditions.

According to a recent social media post by crypto observer Evanss6, "Selling vertical moves properly is hard." The tweet further elaborated that this strategy, which involves specific options contracts designed for defined risk and reward, "hasn't seen majors funding on Binance stretched (in large part due to the size of the spot bid from treasury cos)." This suggests that the influx of institutional capital directly impacts the viability of certain derivative strategies.

Vertical spreads are options strategies where a trader simultaneously buys and sells options of the same type and expiration date but at different strike prices. These are typically employed to speculate on moderate price movements while limiting both potential profit and loss. The challenge noted by Evanss6 implies that the market conditions, influenced by significant spot buying, may be making it harder to find the necessary liquidity or price differentials for these strategies to be profitable or even executable.

Binance, the world's largest cryptocurrency exchange, has seen a significant surge in institutional engagement, with its institutional user base growing by 97% in 2024. The exchange has been actively enhancing its offerings for corporate clients, including institutional lending services with up to 4x leverage and features allowing collateral aggregation across sub-accounts. This robust infrastructure supports massive trading volumes, with over $125 trillion in combined spot and futures transactions since its inception.

The "spot bid from treasury cos" refers to the increasing trend of corporate treasuries and other large institutional investors accumulating direct holdings of cryptocurrencies. This institutional demand for spot assets can absorb significant market liquidity, potentially making it challenging for derivative strategies that rely on specific market conditions or funding rates to operate as expected. As more traditional financial entities enter the crypto space, their large-volume spot purchases can create imbalances that affect the broader market's efficiency and the profitability of certain trading methodologies.