Roughly two and half years after the launch of the world’s first Bitcoin futures, CME Group is looking to bring another level of diversification to cryptocurrency traders with a micro Bitcoin futures contract.
Closely tied to its older brother, the smaller-sized contract is based on the same underlying reference index, the CME CF Bitcoin Reference Rate, and will be settled in cash. The index was developed in partnership with CF Benchmarks to provide real-time BTC price in dollars. The index references pricing data using transactions and order book activity from several cryptocurrency exchanges, currently made up of Kraken and Bitstamp.
The micro contract, which is expected to debut on May 3, will have just 1/10 of the notional value of the original contract. CME’s mini futures on the No.1 cryptocurrency are currently being reviewed by regulators, and the exchange operator confirmed that once the addition clears, they will be available for purchase.
Chicago-based CME said the move marks a new development in the nascent crypto futures market that will give new access to retail investors, either those looking to branch into different markets or struggling to participate due to limited capitalization.
One-tenth of the size of standard contracts is introducing professional traders to many benefits when trading these limited-risk contracts.
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“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,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products.
Moreover, the CME provided updated metrics about its Bitcoin futures, which averaged 13,800 contracts per day in 2021 (equal to around 69,000 bitcoin), apparently representing institutional interest.
Both figures are the culmination of more than a year of increasing prices for Bitcoin, which skyrocketed by approximately 300% in 2021.
Surging prices led to a jump in open interest and trading volume for CME’s Bitcoin futures as investors sought to hedge their positions in the spot market by opening futures positions at the exchange.
Furthermore, the mini BTC derivatives come barely one month after the launch of Ether futures contracts, which was the latest move by the world’s largest futures exchange operator to expand into the crypto business.