- CME Group’s Micro Bitcoin futures have passed the one million contract traded mark.
- This financial instrument allows institutions and retail traders to invest at a price lower than 0.1 BTC.
- Launched less than two months ago, the request shows that institutions are looking to hedge their positions.
Micro Bitcoin futures contracts launched by the Chicago Mercantile Exchange (CME) in early May gained popularity in the first two months of trading.
The Right Time to Launch Smaller Bitcoin Futures
The CME group launched Micro Bitcoin futures on May 3, providing a more profitable entry for market participants.
Valued at 0.1 BTC, the derivative aimed to open the door to wider public adoption of the new asset class. By comparison, the primary unit of Bitcoin futures is 5 BTC. They settled these financial instruments in cash, based on the Bitcoin CME CF benchmark rate.
With the launch of CME’s Bitcoin futures contract in late 2017, the cryptocurrency derivatives industry quickly gained momentum. In December 2020, these transactions represented 55% of the overall market.
Citing the growing demand for smaller contracts, CME announced its intention to launch a micro Bitcoin derivative product, which has since exceeded one million contracts traded since its launch.
According to Tim McCourt, director of CME, the new financial product is popular among institutions and day traders looking to control their risk:
This small contract is designed to provide market participants – from institutions to smaller, sophisticated and active traders – another tool to hedge their Bitcoin spot price risk or execute Bitcoin trading strategies efficiently, cost effective and easily accessible.
These contracts address two major concerns of potential cryptocurrency investors, including the high entry price and the need for regulated financial products.
Brooks Dudley, Global Head of Digital Assets at ED&F Man Capital Markets, said:
We saw more institutional volume than expected, which shows that now is the time for a smaller Bitcoin contract.
The increased activity in the derivatives market suggests that traders are hedging their positions and betting on short-term Bitcoin price movements. Institutions have reduced their long-term exposure to Bitcoin and other large-cap cryptocurrencies, with outflows totaling $79 million last week, according to CoinShares.