Since in March the Chicago Board Options Exchange (CBOE) announced they were ending its Bitcoin futures products, the Chicago Mercantile Exchange (CME Group) has seen a huge flood of bitcoin derivatives volumes.
In May, CME’s bitcoin futures surpassed 33,000 contracts ($1.3 billion notional value) in one day. Also, CME’s open interest for its bitcoin derivatives positions smashed an all-time record high of 5,190 contracts. Bare in mind that June volumes are just starting to pick up and so are contracts in July.
CME Bitcoin futures (BTC) shows growing signs of institutional interest. BTC open interest rose by a record 643 contracts in a single day, establishing a new all-time high of 5,311 contracts on June 17 (26,555 equivalent bitcoin; ~$250M notional). https://t.co/I6A3jD6Iq3 pic.twitter.com/ljz6EbvK79
— CMEGroup (@CMEGroup) June 18, 2019
This huge rise came probably as a result of increased institutional investment coming into the market in the last quarter. The truth is there happened huge developments in the crypto space over the last few months: Bitcoin climbed to $9K, Facebook stepped into the blockchain space and Fidelity launched their crypto custodian service.
Analysts find this record quite important because for many years the crypto market had been driven by retailers in an unregulated environment, which lacked the legitimacy and liquidity to tempt in bigger players from the traditional financial space. Even though the arrival of institutional investment is regarded as a huge advantage for the crypto market, it is also more than likely to cause an increase in CME gaps and forced liquidations that have an overriding effect on BTC price volatility. At the time of writing Bitcoin price was up by 1.08% to $9,255.87.
In addition to the record numbers, CME Group published a new report on June 5 analyzing of the CME CF Bitcoin Reference Rate (BRR). The report explains how the BRR system works and how the bitcoin-based index avoids manipulative practices and gives an accurate representation of price.
The report says:
“There is liquidity in the BRR, in the 1 year to March 2019, over USD 3 billion worth of bitcoin trades were executed, over 1.8 million trades were included in the BRR based on a total of 607,000 bitcoins traded, this shows credibility in the computation of the BRR.”
CBOE, on the other hand, was the very first exchange in America which had listed Bitcoin futures one year and six months ago.
During its launch, CBOE Global Markets’ then-COO (Chief Operating Officer) and President Chris Concannon had stated how they thought derivatives would bring about changes in the conventional finance sector and accelerate the acceptance of digital currencies.
While CME is noticing increased interest and positions, the Cboe Global Markets settled its last bitcoin futures contracts yesterday, 3 p.m. Chicago time.