The owners of one of the world’s largest derivatives exchanges have announced that they will offer two new futures products based on cryptocurrencies.
CME Group Inc. plans to launch euro-denominated bitcoin and ethereum futures contracts on Aug. 29, pending regulatory review, the company announced in a statement Press release. The size of these latest futures products will be 5 BTC and 50 ETH per contract. Each will be settled in cash using the daily CME CF Bitcoin-Euro Reference Rate and CME CF Ether-Euro Reference Rate, respectively.
“The euro-denominated cryptocurrency is the second most traded fiat currency after the U.S. dollar,” said Tim McCourt, global head of equities and foreign exchange products at CME. 28% of transaction volume, an increase of more than 5% compared to 2021.”
The offerings come as the crypto market continues to struggle, with bitcoin down about 50% so far this year and ethereum down 56%. This prolonged state of volatility may be what attracts investors to crypto futures, which allow traders to hedge their cash positions in digital currencies.
“Continued uncertainty in the cryptocurrency market, coupled with strong growth and deep liquidity in our existing bitcoin and ether futures, is increasing demand for risk management solutions from institutional investors outside the U.S.,” explained McCourt.
However, the current trading volume in the crypto derivatives market dwarfs spot trading. This can lead to huge market instability, as futures contracts increase volatility in specific market sentiments. For example, when Bitcoin plunged 30% in May 2021, leveraged positions in futures and options were liquidated, amplifying the sell-off.
Earlier this year, the world’s largest financial derivatives exchange launched micro-options on bitcoin and ethereum. The contracts, which will account for one-tenth of each cryptocurrency, will be open to not only institutional traders, but also retail traders designed for these instruments, CME Group said.
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