The Chicago Mercantile Alternate (CME) launched its Bitcoin (BTC) futures contract in December 2017. This was across the similar time that BTC had reached an all-time excessive of $19,800, but by late 2018 the worth had dropped to $3,100. Traders in cryptocurrencies rapidly discovered that CME spinoff contracts allowed them to make bullish bets with leverage, but additionally enabled them to guess towards the worth, a follow generally known as shorting.
Traditionally, the Securities and Alternate Fee (SEC) has rejected Bitcoin exchange-traded fund (ETF) proposals attributable to considerations about manipulation on unregulated exchanges. The rising significance of CME’s Bitcoin futures market may handle this difficulty and just lately, Hashdex has even requested a Bitcoin ETF that relies on Bitcoin’s physical trades inside the CME market.
Skilled merchants usually use BTC derivatives to hedge dangers. As an illustration, one can promote futures contracts whereas concurrently shopping for BTC utilizing borrowed stablecoins utilizing margin. Different examples embrace promoting longer-term BTC futures contracts whereas buying perpetual contracts might assist profit from value discrepancies over time.
CME overtook Bybit to grow to be the second largest BTC futures market
CME has performed a key function within the Bitcoin futures market since 2020, amassing a formidable $5.45 billion open curiosity by October 2021. Nonetheless, over the next years, the hole widened as CME’s Bitcoin futures market reached $1.2 billion in January 2023, trailing behind exchanges like Binance, OKX, Bybit and Bitget.
Extra just lately, Bitcoin value dropped by 12.8% between Aug.16 and Aug. 17, resulting in a $2.4 billion discount within the mixture futures open curiosity. Notably, CME was the one alternate unaffected when it comes to open curiosity. Consequently, CME turned the second-largest trading platform on Aug. 17, with a $2.24 billion BTC open curiosity, in response to information from Coinglass.
It is price noting that CME solely gives month-to-month contracts, which differs from perpetual or inverse swap contracts, probably the most traded merchandise on crypto exchanges. Moreover, CME contracts are all the time cash-settled, whereas crypto exchanges present contracts based mostly on each stablecoins and BTC. These distinctions contribute to the distinction in open curiosity between CME and crypto exchanges, but there’s extra to the story.
CME futures present discrepancies relative to crypto exchanges
Except for variations in contract settlement and the absence of perpetual contracts, the trading of Bitcoin futures on CME diverges considerably from most crypto exchanges when it comes to each volume and pricing dynamics. The CME information a median every day volume of $1.85 billion, which falls in need of its $2.24 billion open curiosity.
In distinction, Binance’s BTC futures see a every day volume nearing $10 billion, 3 times better than its open curiosity. A comparable sample is noticed at OKX alternate, the place every day trading in BTC futures reaches about $4 billion, surpassing its $1.4 billion open curiosity. This variance will be attributed partially to CME’s greater margin requirement and the fee-free trading atmosphere for market makers on crypto exchanges. Moreover, CME’s trading hours are constrained, with a halt from 4:00 p.m. Central Time to five:00 p.m., and a full closure on Saturdays.
Nonetheless, varied components contribute to cost distinctions in comparison with different exchanges. These embrace shifts in demand for leverage amongst lengthy and brief positions, together with potential disparities within the Bitcoin index value calculation throughout totally different suppliers. Lastly, it’s essential to contemplate the solvency dangers related to the tie-up of margin deposits (collateral) till the BTC futures contract settlement.
Associated: When will it be too late to invest in Bitcoin?
Notably, CME Bitcoin futures have traded at roughly $280 greater than these on Binance for a similar December 2023 expiration. Finally, the day-to-day pricing of BTC future contracts hinges on a number of variables. Whereas CME’s trading volumes are trending upward, its pricing mechanism won’t flawlessly mirror Bitcoin’s value actions on crypto exchanges.
Given the intricate interaction of variables impacting its pricing and trading dynamics, it fails to offer enhanced value steering to BTC buyers.
This text is for basic data functions and is not supposed to be and shouldn’t be taken as authorized or funding recommendation. The views, ideas, and opinions expressed listed below are the writer’s alone and don’t essentially mirror or signify the views and opinions of Cointelegraph.
Cointelegraph By Marcel Pechman CME Bitcoin trading volume surpasses Bybit, but is it impacting BTC value? cointelegraph.com 2023-08-31 18:20:25
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