By
Bhushan Akolkar
May 13th, 2024
The CME is set to launch micro Bitcoin futures in May. The new investment tool aims to include sidelined clients and ensure more precision, risk management and choice.
In an aim to bring in new clientele, the Chicago Mercantile Exchange (CME) announced on Tuesday its plans to launch micro Bitcoin futures. The firm plans to go live with this as early as May 03 pending regulatory approval. The CME noted that the futures will be sized at one-tenth of Bitcoin and will be settled with cash.
Tim McCourt, CME Group global head of Equity Index and Alternative Investment Products noted this in the release:
“The introduction of Micro Bitcoin futures responds directly to demand for smaller-sized contracts from a broad array of clients and will offer even more choice and precision in how participants can trade regulated bitcoin futures in a transparent and efficient manner at CME Group.”
A standard Bitcoin contract is priced at nearly $300,000, 5 BTC. The proposed micro Bitcoin future will be 0.1 Bitcoin each $5,900 at current prices. On top of attracting new markets, this will allow clients to have better precision and to better manage their risks.
CME Group Expects Global Participation
McCourt further acknowledged that there is demand for this both in the US and across the globe. “We’ve already had large buy-side customers reach out expressing enthusiasm,” McCourt said in an interview.
The CME introduced Bitcoin futures in 2017. Institutional demand in the second half of 2020, saw the firm become the biggest futures exchange as per open interest in the world. The year has however seen the firm lose clients and futures’ interest fall, resulting in its slip to fourth. This new product seems to be a response. Identifying that there is a huge market that was interested in speculating Bitcoin but finding standard Bitcoin contracts to be expensive.
It is noteworthy, the firm has recently launched Ethereum futures. Their performance has been miniature compared to Bitcoin. Where Bitcoin sees $4 billion traded daily, Ethereum is recording $70 million.
Bitcoin Faces Extreme Volatility
Speculating on Bitcoin prices is getting harder, in the short term at least. On Wednesday, Bitcoin flash crashed losing $2K in under five minutes. In this time, over $600 million longs were liquidated. The crash was a unique reversal after Bitcoin signaled a bullish recovery at the start of the week. With positive development from the likes of Visa and Nuvei integrating crypto as well as Paypal allowing users to pay with crypto, the week was set to be bullish.
The wider sentiment remains bullish but extreme volatility seems to be creeping in. With Bitcoin behaving sporadically, futures contracts are set to be more popular as clients try to determine where prices will be at future dates.