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Bitcoin Futures Bubbling at CME: ETF Excitement or Repeat of 2021 Bull Run?

Published October 30, 2023 1:57 PM
Teuta Franjkovic
Published October 30, 2023 1:57 PM

Key Takeaways

  • With $3.54 billion in notional open interest (OI), CME became the second-largest Bitcoin futures exchange. 
  • Demand for futures-based ETFs is behind the spike in CME’s OI. 
  • For the first time, CME’s OI top 100,000 BTC.
  • CME market share is the closest to Binance’s.

Significant advancements have been made by the Chicago Mercantile Exchange (CME) in the realm of Bitcoin futures and perpetual futures, according to latest figures,.

In fact, its notional open interest (OI) has surged recently, solidifying its position as the second-highest  among exchanges that provide both normal Bitcoin and perpetual futures. 

CME Ranks 2nd in BTC Futures

The Chicago Mercantile Exchange (CME), a regulated institution, is making significant strides in becoming one of the leading exchanges for Bitcoin (BTC) futures and perpetual futures trading when it comes to open interest. This development brings to mind the early stages of the 2020-2021 bull market. 

As reported by Coinglass , CME has observed a substantial increase in its notional open interest (OI), reaching $3.57 billion. This surge has propelled it to the position of the second-largest exchange for Bitcoin futures, a remarkable shift from its previous rank, which was fourth, just a few weeks ago. 

Notional open interest refers to the US dollar value associated with the quantity of active or open contracts. In comparison, Binance, an unregulated offshore exchange, continues to maintain its dominance in the market with a notional open interest of $3.85 billion, which is approximately 8% higher than CME‘s. 

CME’s Cash-Settled BTC Futures OI Top 100,000 BTC

In a remarkable development, the open interest on CME’s cash-settled futures contracts has surged  past the 100,000 BTC mark, marking the first time it has reached such heights. Additionally, CME has achieved an unprecedented 25% market share in the Bitcoin futures industry. 

CME provides a range of Bitcoin futures contracts, including standard contracts with a value of five bitcoins each, as well as micro contracts representing fractions of a bitcoin. Furthermore, they offer micro futures tied to tenths of an ETH (Ethereum) and ether futures with a contract size of fifty ETH. 

Notably, the majority of open interest on offshore exchanges is attributed to perpetual futures, distinctive for their absence of an expiration date and use of a funding rate mechanism to align with the current spot price. 

Observers of the market are speculating  that CME’s recent expansion may signal a surge in institutional interest in Bitcoin.  

This month, Bitcoin has seen a 27% increase in value, driven by gains in spot exchange-traded funds (ETFs) and heightened macroeconomic uncertainties. 

The rise in Bitcoin’s appeal has also been influenced by individual investors. Data from Matrixport reveals  that the rolling five-day volume of the leading Bitcoin futures ETF offered by ProShares experienced a staggering 420% surge, reaching $340 million last week. It’s important to note that the primary asset class of this ETF consists of CME Bitcoin futures.   

CME’s Rise Indicates Waning Pessimism

An alternative viewpoint is by Deutsche Digital Assets’ head of research, André Dragosch. He contends that the unwinding of negative bets on offshore exchanges, as opposed to an increase in long futures positions, is more likely to be the cause of CME’s expansion. 

Dragosch said that while CME’s portion of the open interest in Bitcoin futures has increased, there hasn’t been a noticeable increase in the total quantity of Bitcoin futures and perpetual open interest in terms of Bitcoin terms. 

This implies that a short squeeze and a decline in total open interest may be more responsible for the current price spike. 

The possible approval of a Bitcoin spot ETF is another exciting development that has raised the price of Bitcoin in the market. Due in large part to market conjecture on the spot ETF, Bitcoin experienced a surge towards the $35,000 mark earlier this month. 

Simultaneously, the price of Bitcoin has increased by 13%, surpassing that of Ethereum, for a future month. This shows that a growing number of people—particularly large investors—want Bitcoin futures. 

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