CME Group’s(Chicago Mercantile Exchange) micro-bitcoin futures have already traded more than one million contracts. This instrument allows institutions and retail traders to invest in the crypto asset at a lower price point of 0.1 bitcoin. The contract has only been available for seven weeks, and demand shows there is still room for new derivatives in the crypto market.
CME Micro Bitcoin Futures Sell Big
When the CME launched a new set of bitcoin derivatives contracts directed to smaller investors almost two months ago, it didn’t expect so much buzz around it. But, according to volume numbers, it seems to have nailed a need in the market for a more granular bitcoin exposure. Now, as more than a million micro-bitcoin futures contracts have changed hands, it’s a big milestone for a very young instrument. That’s an even bigger achievement, considering cryptocurrency is still a niche market.
According to Tim McCourt, CME Group’s global head of equity index and alternative investment products, the design of this product is key for its success. He stated:
This micro-sized contract is designed to provide market participants – from institutions to smaller, sophisticated, active traders – with another tool to hedge their spot bitcoin price risk or execute bitcoin trading strategies in an efficient, cost-effective, and easily accessible way.
The micro bitcoin futures launched back in May and has opened the regulated crypto derivatives market to micro investors. With these contracts, CME addresses two main worries for potential cryptocurrency investors: the high price point entry and the need for regulated instruments.
Brokers and investment services have also experienced a sensible demand for micro-bitcoin futures. Martin Franchi, CEO of Ninjatrader Group, declared these contracts have become more popular in the space. Franchi stressed:
We have seen the fast rise in popularity of this new micro contract among the Ninjatrader user community correlate with growing demand from cryptocurrency traders interested in the opportunity to diversify and leverage professional tools in their trading.
Ninjatrader boasts a community of more than 60,000 customers. Steven Sanders, Executive vice president of marketing and product development at Interactive Brokers, stated at its launch that:
This smaller sized contract will enable more of our sophisticated, individual clients to participate in the market, and will allow our institutional clients to more precisely manage their bitcoin exposure.
This new pricing strategy might empower new customers to enter more regulated marketplaces like CME. While derivates are still highly concentrated in unregulated platforms, this might change in the future. CME’s micro-bitcoin futures are part of an interesting strategy to achieve that change.