Cash-settled micro-Bitcoin futures launched for CME Group

CME Group saw the launch of its new micro Bitcoin futures at the start of the week, providing a smaller-size option of its current derivatives contract of the cryptocurrency. Launching in the US, the Chicago-based company has decided to offer the new product to respond to the rapidly escalating demand surrounding cryptocurrency derivatives.

CME Group first announced the specific details of the contracts back in March of this year, revealing that the derivatives would be just 1/10th the size of standard Bitcoin. The US exchange also stated that it hoped the new offering would broaden its already healthy client base as it reflected current trends in demand.

Tim McCourt, CME Group’s Global Head of equity index and alternative investment products, said:

Tim McCourt, CME Group

Tim McCourt
Source: LinkedIn

At one-tenth, the size of one bitcoin, Micro Bitcoin futures will provide an efficient, cost-effective way for a broad array of market participants, from institutions to sophisticated, active traders, to fine-tune their bitcoin exposure and enhance their trading strategies, all while retaining the benefits of CME Group’s standard Bitcoin futures.

CME Group

Coinciding with Bitcoin first reaching $20,000 – a monumental milestone for the cryptocurrency – CME Group first launched  Bitcoin derivatives back in December of 2017. To reflect US demand for crypto derivatives, the company then further expanded its selection of offerings by launching Ethereum futures and  Bitcoin options. It has since become the world’s third-largest Bitcoin derivatives provider, with an overall aggregate open interest of nearly $2.5 billion.

In line with CME Group’s previous bitcoin futures, the new contract is set to be settled in cash and based on CME’s CF Bitcoin Reference Rate. Taking into consideration the fact that Bitcoin is rapidly becoming an expensive cryptocurrency to own, particularly on CME for which one contract requires 5 BTC.  With  BTC price currently sitting above $58,500,  these new smaller-sized offering is likely to appear highly appealing to a broader group of investors.

Joshua Lim, Head of Derivatives at Genesis Trading, said:

Joshua Lim, Genesis Global Trading

Joshua Lim
Source: LinkedIn

The Micro Bitcoin futures meet a real market need for more granular exposure on Bitcoin futures. More investors will be able to access and trade this market, and options liquidity providers like Genesis will be able to delta hedge with more precision.

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