• Genesis Launches New Crypto Futures Product with End-of-Day Pricing

  • Genesis Global Capital and Akuna Capital have completed the first trade in which investors can lock in exposure to the bitcoin reference rate (BRR).

    The companies have completed the first over-the-counter (OTC) block trade of a basis trade at index close (BTIC) transaction on bitcoin futures contracts traded on the Chicago Mercantile Exchange.

    BTIC has long been used in traditional equities markets, but it is now available for cryptocurrencies for the first time. It is a move that will allow institutional investors to buy or sell on the basis of the reference rate, which in the case of bitcoin is the US dollar price of one bitcoin at 4 p.m. London time.

    BRR collects daily trade data from major bitcoin spot exchanges between 3 and 4 p.m. London time. It’s meant to be a tradable reference rate that serves as a kind of “end-of-day price” for bitcoin, despite the fact that the digital asset trades around the clock.

    “It’s very important for people who are referenced to that benchmark, which is a lot of people,” Joshua Lim, head of derivative trading at Genesis, said. “It’s people who traded futures; it’s people who have ETFs that closed at 4pm London; it’s funds that have to mark their NAV at 4pm London.” “As more people began to use it as a reference point over time, it became critical to have a way to trade it.”

    While CME has been offering bitcoin futures contracts since 2017 and cash-settled micro futures contracts since March 2021, this new trade provides more exposure to existing products. Genesis provides liquidity for CME’s entire suite of bitcoin and ether futures products.

    “This is the first time we’re offering BTIC for our cryptocurrency futures, and we’re pleased Genesis is able to support and provide liquidity for BTIC on day one,” said Tim McCourt, CME’s global head of equity index and alternative investment products. “This is yet another example of how we provide innovative solutions to clients seeking exposure to CME bitcoin and ether futures.”

    The announcement comes as speculation about a bitcoin futures exchange-traded product grows. Lim did not give a specific date when asked when or if the US Securities and Exchange Commission would approve such a product, but did say that increased volatility is to be expected.

    He predicts a significant inflow of assets into futures-based products if the deal is approved. People will be forced to trade that particular instrument, causing a lot of distortions on the CME futures curve, as opposed to now, when that instrument does not have much demand due to the high collateral requirements.

    “If there is an ETF, the AUM on those futures must increase, the open interest on those futures must increase, and more people will have to post dollar collateral, making funding those positions very expensive,” Lim explained. “We’re very interested to see how that plays out, because it will result in futures trading at even higher premiums to spot than they do now.”

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