CME Group, the world’s second-largest options exchange behind Cboe with a market cap of $51.4 billion, has officially listed bitcoin futures contracts on its trading platform earlier today, on December 18.
Bitcoin Reference Rate (BRR) on the CME bitcoin futures exchange, which aggregates the trade flow of major bitcoin spot exchanges during a specific calculation window into a once-a-day reference rate of the U.S. dollar price of bitcoin, is at $19,448. That is a $500 premium on the global average bitcoin price at $18,924.
Camila Russo, Bloomberg markets reporter, revealed that CME bitcoin futures recorded around $35 million in trades on its debut, processing more than 370 contracts.
Cboe, despite being the larger options exchange, processed just over 1,000 contracts on Friday, after its listing of bitcoin futures on December 14, Thursday. Since 1 CME contract is equivalent to 5 bitcoin while 1 CBOE contract represents the holding of 1 bitcoin, CME processed 45 percent more traders on its debut than Cboe.
Gap between CME bitcoin futures and spot narrowed quickly after open as both fell below $19,000. More than 370 contracts traded, or about $35 million.
1 CME contract = 5 bitcoin, while 1 Cboe contract = 1 bitcoin. (Correcting from earlier tweet). pic.twitter.com/mS9bqTTNio
— Camila Russo (@CamiRusso) December 18, 2017
Tens of Billions in Institutional Money Will be Invested in Bitcoin
As of current, Cboe and CME are processing around $60 to $70 million in bitcoin trades on a daily basis. In contrast, the global bitcoin exchange market is processing more than $13 billion per day. Cboe and CME only account for a small fraction of global bitcoin trading and investment.
However, the bitcoin futures market is crucial for the mid to long-term growth trend of bitcoin because it opens the bitcoin market to a group of investors that previously could not access the global bitcoin exchange market. Institutional investors, retail traders, hedge funds, and investment banks are now able to invest in bitcoin through bitcoin futures.
“Over 100 hedge funds have been created in the past year exclusively to trade digital currency. An even greater number of traditional institutional investors are starting to look at trading digital assets (including family offices, sovereign wealth funds, traditional hedge funds, and more). By some estimates there is $10B of institutional money waiting on the sidelines to invest in digital currency today,” said Coinbase CEO Brian Armstrong.
More importantly, various studies have revealed that the global offshore banking market is valued at over $40 trillion. Most offshore bank account holders rely on centralized financial service providers such as Goldman Sachs and JPMorgan to process trades, transactions, and store wealth.
Upon the debut of CME’s bitcoin futures contracts, sources of both Goldman Sachs and JPMorgan disclosed that the two banks will begin clearing bitcoin futures on behalf of their clients. In addition to the $10 billion from investment firms and hedge funds, a significantly larger amount of capital will be reallocated from offshore banking accounts to the bitcoin market in the next few years.
Nasdaq Planning 2018 Launch
After observing the mid-term success and performance of Cboe and CME, Nasdaq, the world’s second-largest stock market behind the New York Stock Exchange (NYSE) will introduce bitcoin futures in the first quarter of 2018.
NYSE has also expressed its optimism towards bitcoin futures and announced its intent to list bitcoin futures in the upcoming months.
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