CME Bitcoin trading instruments
CME Group’s Bitcoin futures contracts have been a success. At the moment, they average 7,237 contracts per day representing a 132 percent increase from the same period last year. This is a clear sign of the growing interest in Bitcoin among institutional investors, which has taken the CME to see a record of 33,677 contracts traded on a single day, worth over $1.3 billion dollars.
Now, due to the increasing demand and the significant growth that CME experienced on its Bitcoin futures contracts over the last year, the firm decided to take a step forward and provide its clients with a new financial instrument.
Tim McCourt, head of equity index and alternative investment products at CME Group Global said:
“We believe the launch of options will provide our clients with additional flexibility to trade and hedge their Bitcoin price risk. These new products are designed to help institutions and professional traders to manage spot market Bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment.”
CME Group seems committed to continue providing crypto-related trading products to its customers. With the new Bitcoin options contracts that will launch in Q1 2020 CME’s clients will enjoy an additional tool for “precision hedging and trading.”
Derivatives for institutional investors
In December 2017, both the CME Group and the Chicago Board Options Exchange (CBOE) became the first major marketplaces to provide Bitcoin futures contracts to institutional investors. At the time, the move was seen as the catalyst that will bring Bitcoin into the mainstream financial world. However, following the crypto bear market of 2018 CBOE delisted its Bitcoin futures contracts in March 2019.
Thus, CME was left in control of the BTC derivatives market and it plans to continue to expand into these derivatives.
“CME Group is a neutral marketplace. Our role is to help Bitcoin market participants manage their risk, regardless of whether the underlying price goes up or down,” stated Tim McCourt.
Now, for the first time in over six months, CME may face some serious competition. On Sept. 23, Bakkt will launch its long-awaited Bitcoin futures contracts. Unlike CME’s, Bakkt Bitcoin futures will settle using real Bitcoin at contract expiry. This could allow Bakkt to capture a substantial share of Bitcoin’s trading volume while further helping with BTC price discovery.
Some of the most prominent analysts in the cryptocurrency industry, such as Josh Olszewicz, argue that CME Bitcoin futures settlements have a major impact on the market valuation of Bitcoin. Olszewicz goes as far as to believe that CME’s futures expiration dates could have triggered the bear market of 2018.
It’s still uncertain the magnitude of impact, if any, that Bakkt futures and CME options derivatives will have on the BTC markets.
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