More than one million contracts of CME Group’s (Chicago Mercantile Exchange) micro-bitcoin futures have already been traded. Institutions and retail traders can invest in the crypto asset at a lower price point of 0.1 bitcoin using this instrument. The contract has only been available for seven weeks, but demand indicates that there is still room in the crypto market for additional derivatives.
CME Micro Bitcoin Futures are a huge seller. The CME didn’t expect such a stir when it unveiled a new set of bitcoin derivatives contracts aimed at smaller investors roughly two months ago. However, based on activity, it appears to have identified a market need for more granular bitcoin exposure. It’s a major milestone for a relatively new instrument now that more than a million micro-bitcoin futures contracts have changed hands. That’s even more impressive given the fact that cryptocurrency is still a niche business.
The architecture of this product, according to Tim McCourt, CME Group’s global head of equities index and alternative investment products, is critical to its success. He explained:
This micro-sized contract is intended to give market players – ranging from large institutions to smaller, sophisticated, active traders – another instrument to hedge their spot bitcoin price risk or execute bitcoin trading methods more efficiently, cost-effectively, and easily accessible manner.
Smaller bitcoin futures were established in May, allowing micro investors to participate in the regulated crypto derivatives market. CME addresses two major concerns for potential cryptocurrency investors with these contracts: the high price point of entry and the need for regulated securities.
Brokers Reach Consensus Micro-bitcoin futures have also seen a healthy demand from brokers and financial providers. These contracts have becoming more popular in the space, according to Martin Franchi, CEO of Ninjatrader Group. Franchi emphasized:
The rapid surge in popularity of this new micro contract among Ninjatrader users has coincided with an increase in demand from cryptocurrency traders looking to diversify their portfolios and employ professional tools in their trading.
Ninjatrader has a customer base of over 60,000 people. At the time of its inception, Interactive Brokers’ Executive Vice President of Marketing and Product Development, Steven Sanders, stated:
More of our sophisticated, individual clients will be able to engage in the market, and our institutional clients will be able to manage their bitcoin exposure more precisely with this smaller contract.
This new pricing structure may enable new clients to participate in highly regulated markets like CME. While derivatives remain concentrated in unregulated platforms, this may alter in the future. Micro-bitcoin futures from CME are part of an intriguing approach to bring about that transformation.