Exchange

CME’s bitcoin futures are off to a record-breaking start this year

Quick Take

  • CME Group is reporting a record-breaking start to 2019 for its futures product tied to bitcoin
  • In an internal email, the firm said institutional interest has increased for the contract

CME Group, the Chicago-based derivatives market, has seen its future tied to bitcoin take off during the first quarter of 2019, according to an internal email. 

The firm first rolled out its future, which allows companies to bet on the future price of the crypto asset, in December 2017. As per the email reviewed by The Block, a CME representative wrote that Feb. 19 marked a new record for the firm’s bitcoin futures contract. 

‘Yesterday (Feb 19th) set a new record with 18,338 contracts traded,” the note said. “This is equivalent to 91,690 bitcoin or $360MN.”  

This beats the last record set on Nov. 20 2018. “Q1 2019 is off to a strong start,  ADV has improved to 4,630 contracts (23,150 equivalent bitcoin), up ~13% from Q4 2018 while [open interest] rose to 4,076 contracts, an improvement of 21.5% over Q4 2018,” the note said.

In addition, the note mentioned specific numbers about the firm’s clients. Since launch, the firm has had over 2,100 accounts trade the futures contract and 30 unique firms have cleared it. Interest from institutions has picked up as well.

“Institutional interest has gradually risen and the number of LOIHs (Large Open Interest Holders) has been holding steady around 43 holders since November,” according to the email. “A LOIH is an entity that holds at least 25 BTC contracts.”

CME Group makes up a small fraction of the bitcoin derivatives market with names such as BitMEX, BitFlyer, and OKEX dominating trading volumes in such products. Derivatives, which include futures and other products such as swaps and options, are heating up in the nascent cryptocurrency market, as The Block reported earlier this week.

“As an ecosystem matures, and as the crypto ecosystem matures, people look for new ways to express a view of the market,” Thomas Chippas, CEO of ErisX said in a phone interview with The Block. ErisX is one of the crypto firms set to launch a derivatives exchange this year in the U.S. — among others including Intercontinental Exchange’s Bakkt and SeedCX. 

Bakkt has been aiming to get a bitcoin futures product off the ground since last year, whereas Seed CX and ErisX will offer physically delivered futures in a number of cryptos, including possibly ethereum and bitcoin. Crypto giant Binance is also eyeing the derivatives market.

“The space has been moving into this direction for a long time,” said Mark Lamb, CEO of CoinFLEX, a crypto derivatives exchange that launched earlier this year. His firm supports trading physically delivered crypto futures. Perpetual swaps, the product offered by firms like BitMEX, provide a way to trade spot bitcoin synthetically. 

“Traders are all about the efficiency of their capital and maximizing the return on equity,” he said. “Futures just make much higher returns more possible as they are really great for arbitrage and other complex strategies.”