CME Group Launching Euro Crypto Futures

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The own­ers of one of the world’s largest deriv­a­tive exchanges announced that they will be offer­ing two new futures prod­ucts based on cryptocurrencies.

CME Group Inc. plans on intro­duc­ing Bit­coin and Ethereum futures con­tracts denom­i­nat­ed in Euros on August 29, pend­ing reg­u­la­to­ry review, the com­pa­ny announced in a press release. These lat­est futures prod­ucts will be sized at five Bit­coin and 50 Ether per con­tract. Each will be set­tled by cash using the dai­ly CME CF Bit­coin-Euro Ref­er­ence Rate and CME CF Ether-Euro Ref­er­ence Rate, respectively.

“Euro-denom­i­nat­ed cryp­tocur­ren­cies are the sec­ond high­est trad­ed fiat behind the US dol­lar,” said Tim McCourt, glob­al head of equi­ty and FX prod­ucts at CME. “Year-to-date, the EMEA region rep­re­sents 28% of total Bit­coin and Ether futures con­tracts trad­ed, up more than 5% ver­sus 2021.” 

Drawing on uncertainty

The prod­ucts come as the cryp­to mar­kets con­tin­ue to strug­gle, with Bit­coin down about 50% so far this year, and Ethereum down 56%. This pro­longed state of volatil­i­ty is per­haps what has drawn investors to cryp­to futures, which allow traders to hedge their cash posi­tions in dig­i­tal currency. 

“Ongo­ing uncer­tain­ty in cryp­tocur­ren­cy mar­kets, along with the robust growth and deep liq­uid­i­ty of our exist­ing Bit­coin and Ether futures, is cre­at­ing an increased demand for risk man­age­ment solu­tions by insti­tu­tion­al investors out­side the US,” McCourt explained.

How­ev­er, cur­rent trad­ing vol­umes on the cryp­to deriv­a­tives mar­ket dwarfs that of spot trad­ing. This could poten­tial­ly con­tribute to great mar­ket insta­bil­i­ty since futures con­tracts can inten­si­fy the volatil­i­ty of a giv­en mar­ket sen­ti­ment. For instance, when Bit­coin plum­met­ed up to 30% in May 2021, lever­aged-up posi­tions in futures and options were liq­ui­dat­ed, which then ampli­fied the selloff.

The world’s largest finan­cial deriv­a­tives exchange launched micro options for Bit­coin and Ethereum ear­li­er this year. CME Group said the con­tracts would rep­re­sent one-tenth of each cryp­tocur­ren­cy and be open not only to insti­tu­tion­al but also retail traders, for whom the instru­ments were designed.

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