By
Steve Muchoki
April 19th, 2024
The CME micro Bitcoin futures have proved to be very popular with strong institutional and retail demand for the derivative product. These small-sized contracts give investors the option to gain BTC exposure in regulated environments.
Last month in May 2021, the Chicago Mercantile Group (CME) launched its micro Bitcoin futures and it’s already becoming popular in the market. The CME Group has already traded 1 million contracts for its micro Bitcoin futures as per industry reports.
This investment vehicle gives retail players exposure to Bitcoin derivative products. The CME micro Bitcoin futures are one-tenth the size of one Bitcoin, denominated at 0.1 BTC. The minimum contract size for the CME Bitcoin Futures launched back in 2017 is 5 BTC.
But just within the first two months of trading, the CME micro Bitcoin futures has created a rage among retail investors. CME executive Tim McCourt said that the new product is quite popular among day traders and institutions to hedge their spot BTC price risk. Mc Court added:
“This micro-sized contract is designed to provide market participants – from institutions to smaller, sophisticated, active traders – with another tool to hedge their spot bitcoin price risk or execute bitcoin trading strategies in an efficient, cost-effective, and easily accessible way”.
This Bitcoin derivative product from CME has significantly reduced the entry barrier for crypto investors. The timing for the launch of the micro Bitcoin futures seems to be just right. Besides, it has triggered higher institutional participation in the asset class.
Surge of Activity in Bitcoin Derivative Market
With the strong volatility in the crypto space recently, institutional players have been reducing their exposure to Bitcoin. As per CoinShares data, $80 million outflows happened in the crypto market over the last week.
The surge in the crypto derivatives market trading activity clearly suggests that traders are hedging their positions while speculating against the short-term movement of BTC. Other brokers have also agreed that they are seeing god demand for micro Bitcoin futures. Martin Franchi, CEO of Ninjatrader Group, which serves more than 60,000 customers agreed that the contracts have become more popular. Franchi said:
“We have seen the fast rise in popularity of this new micro contract among the Ninjatrader user community correlate with growing demand from cryptocurrency traders interested in the opportunity to diversify and leverage professional tools in their trading”.
The new derivatives products will empower more customers to join regulated marketplaces like CME.