30 Apr 2021
The Chicago Mercantile Exchange (CME) has announced plans to launch a new Bitcoin derivatives financial instrument. The product will allow traders to make speculations on fractional units of the largest cryptocurrency.
The Micro Bitcoin Futures contract will be launched on May 3, according to CME Group. Currently, the group is engaged with regulators to get the necessary licensing and approvals needed. The firm plans for each product in this division to be worth 0.1 BTC, which will give investors a better way of hedging against BTC's price volatility.
"Micro Bitcoin futures will be one-tenth the size of one bitcoin. The smaller-sized contract will provide market participants, from institutions to sophisticated, active, individual traders, with one more tool to hedge their spot bitcoin price risk or execute bitcoin trading strategies in an efficient, cost-effective way, all while retaining the features and benefits of CME Group's standard Bitcoin futures," the firm said in the statement.
The firm also added that the launch of this asset class was influenced by the growing demand for small-sized contracts from clients. The statement also noted that the Micro Bitcoin futures would give investors more choice on trading regulated BTC futures at CME.
The CME Group started offering Bitcoin futures contracts in December 2017. CME's greatest competitor, the Chicago Board Options Exchange, had launched BTC futures contracts but seized the offering shortly after.
CME also noted that there were increased trading activities affiliated with Bitcoin futures contracts. A recent report by Cointelegraph stated that the average trading volumes for this derivatives contract at CME increased by 57% in January 2021. The recent crypto bulls are expected to propel these trading volumes further as new investors seek exposure to BTC.
The CME Group has been proactive in expanding its crypto derivatives offering to boost trading volumes and tap into the recent crypto bulls. Before this announcement, the platform launched Ether futures.
Data from the firm shows that since the beginning of 2021, around 69,000 BTC on average has traded daily on the BTC futures contract. Since the launch of Ether futures on February 8, around 38,400 Ether has been traded.
There are also reports that the broader crypto derivatives market is growing in recent months. In December 2020, trades related to crypto derivatives surpassed $1.3 trillion, representing 55% of the overall trades in the broader market.
The strategic expansion of CME Group into the crypto derivatives this year is to ensure the firm taps into this growth. Hence, we could see more crypto derivatives products being launched.
CME Group is a platform that allows its clients to trade a wide range of derivatives products, including futures and options. The platform is available globally and allows participants to manage risks and leverage upcoming opportunities in the crypto market. In addition, the CME Group offers one of the most diversified markets in the financial sector with different offerings ranging from forex, equity indexes, interest rates, metals and commodities.
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