CME Group Launches Bitcoin Futures

Early trading could best be described as muted as low trading volumes and a slight pullback in prices marked the commencement of trading on the much-awaited Bitcoin futures at CME (Chicago Mercantile Exchange) on Sunday. The monthly expiration contracts on Bitcoin futures opened at record levels of $20,650 but quickly retreated to session lows of $18,805, which was below the $19,500 reference price set for the January expiry contract by the exchange.

This was a departure from when the smaller Chicago-based CBOE launched its own version of Bitcoin derivative futures, which actually closed 20% higher on the first day. Contract sizes were also a sixth of what was seen on CBOE’s debut. As at the time of writing, slightly less than 600 CME contracts had been traded, compared to the 4,000 full day contracts traded on a day of the CBOE’s Bitcoin futures trading.

Experts are however not worried about the relatively low volumes on debut day. There is an also a belief that volumes would pick up because of a more attractive settlement pricing on the CME. The CME’s pricing is pulled from multiple exchanges as opposed to that of the CBOE which is obtained exclusively from the prices on Gemini’s auctions. The Gemini exchange is owned by the Winklevoss twins, Cameron and Tyler who were best known for their legal spat with Mark Zuckerberg over the ownership of the concept of Facebook.

This is a brand-new asset class and I think perhaps a lot of investors want to sit back and see how this plays out before dipping their toes in this market,” Spencer Bogart, a partner at Blockchain Capital LLC was quoted as saying shortly after trading commenced. These views were also echoed by other market stakeholders.

“The order book is thin. The CME futures are trading at a premium to CBOE futures, but the premium has come in a bit since the open,” Garrett See, who is the CEO of cryptocurrency trading firm DV Chain, said in an interview with told Business Insider.

The launch of Bitcoin futures on two highly regarded futures exchanges is seen as a major milestone towards legitimizing the cryptocurrency and is largely expected to attract the attention of institutional investors.

The launch should increase buy side pressure and potentially be the catalyst that pushes bitcoin above $20,000… the introduction by CME and CBOE has added validity acknowledging bitcoin as a legitimate asset,” said Shane Chanel, who manages funds for Melbourne-based ASR Wealth Advisers in Melbourne.

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However, there is still an atmosphere of caution around the trading of Bitcoin futures. This is reflected by the relatively low volumes and the steep margin requirements on Bitcoin futures contracts, which currently hover at 40% and 35% at CBOE and CME respectively.

Bitcoin prices also took a breather at major online exchanges. Bitcoin fell 1.9% to $18,650 on Bitstamp, retreating from Sunday’s record highs of $19,666.