The number of contracts traded in the CME Group’s Micro Bitcoin futures has topped one million.
Institutions and retail traders can invest at a lower price point of 0.1 BTC with this financial instrument.
The demand demonstrates that institutions are eager to hedge their positions, despite the fact that the service was only established a few months ago.
The Chicago Mercantile Exchange (CME) released micro Bitcoin futures in early May, and they have garnered a lot of popularity in the first two months of trade.
On May 3, CME Group debuted Micro Bitcoin futures contracts, allowing market players to enter the market at a lower cost.
The derivatives instrument, worth 0.1 BTC, aims to pave the way for broader popular adoption of the new asset class. The main Bitcoin futures contract unit is 5 BTC, in comparison. Based on the CME CF Bitcoin Reference Rate, these financial instruments are cash-settled.
The bitcoin derivatives business swiftly gained traction after the launch of CME’s Bitcoin futures contract in late 2017. By December 2020, these trades would account for 55% of the total market.
CME announced its intention to create a micro Bitcoin derivatives product, citing rising demand for smaller contracts. Since its inception, the product has seen over 1 million contracts traded.
The new financial instrument has been popular among institutions and day traders wanting to hedge their spot Bitcoin price risk, according to CME CEO Tim McCourt. He elaborated:
This micro-sized contract is intended to enable market participants – ranging from large institutions to smaller, sophisticated, active traders – with another instrument to hedge their spot Bitcoin price risk or execute Bitcoin trading strategies in a timely, cost-effective, and simply accessible manner.
The high cost of entry and the requirement for regulated financial products are addressed in these contracts, which address two major issues for potential crypto investors.
ED&f Man Capital Markets’ global head of digital assets, Brooks Dudley, said:
More institutional volume has been witnessed than expected, indicating that the time was ripe for a smaller Bitcoin contract.
The heightened derivatives market activity indicates that traders are hedging their holdings and wagering on short-term Bitcoin price movements. According to CoinShares, institutional investors have cut their long-term exposure to Bitcoin and other large-cap cryptocurrencies, with outflows totaling $79 million last week.
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