CME:Bitcoin options increase after halving

Who’s CME?

A high record

Towards Public Acceptance of Bitcoin

The CME bitcoin options market is exploding, with $760 million traded since the halving. The Chicago Mercantile Exchange (CME) is one of the largest financial institutions, one of the major U.S. futures markets. After Bitcoin’s third halving, the volumes recorded by the platform have exploded. According to The Block, trading volumes and open interest in CME’s BTC options, which were launched at the beginning of the year, have increased significantly since.

Who’s CME?

CME stands for Chicago Mercantile Exchange. Also known as the Chicago Merc, it is a futures and agricultural products market and also the largest market in the world with more than 1 billion options and futures contracts traded annually.

According to investopedia, the Chicago Mercantile Exchange was founded in 1878 under the name “Chicago Butter and Egg Board” before changing its name in 1919. It was the first financial exchange to “demutualize” and become a publicly traded company owned by its shareholders in 2000. Its first futures contracts were launched in 1961 on frozen pork bellies. In 1969, it added financial futures and foreign exchange contracts, followed by the first interest rate, bond and futures contracts in 1972.

In other words, the Chicago Mercantile Exchange (CME) is an exchange organized to trade futures and options contracts. It trades futures contracts, and in most cases options, in the sectors of agriculture, energy, stock indices, currencies, interest rates, metals, real estate and even meteorology.

A high record

Since the halving of Bitcoin, investor interest in Chicago Mercantile Exchange (CME) listed bitcoin options has reached record levels, with the majority of these users reportedly being institutional investors. On the day of the halving, daily trading volume in CME options soared to $17 million, surpassing the record $9.9 million set on May 6, according to data provided by encrypted derivatives research firm Skew. The volume has been growing steadily since then. This is a new record for WEC; Tuesday, May 12, $30 million was broken the next day with a total of $40 million. On Thursday, trading volume reached $36 million, an increase of 2000 per cent from the $1.7 million recorded the previous week. The CME recorded an increase of more than 270% in outstanding interest over the last seven days after the halving.

Evolution of the open interest on CME Bitcoin options. Source:Skew

Halving is the event of dividing the reward, or remuneration, for mining a cryptocurrency. It has been discussed extensively in the article HALVING BITCOIN 2020: Miners in difficulties, uncertainty, and prediction to better understand how it works.

According to a recent CME blog, this year’s halving, which took place on May 11, is unique from previous ones, given the size of the derivatives market and the availability of options and futures contracts on regulated U.S. exchanges.

“A robust options market could also allow for additional income to be earned by miners or enhance long bitcoin positions which would further cushion the impact of the upcoming halving,” wrote Payal Lakhani, the firm’s director of equity research and product development. “With the emergence of a healthy options market, investors can take price signals and consensus estimates about market expectations.”

However, trading volumes and open interest in CME options were really low before the halving. As a result, open interest rose from $35 million on May 11th to $142 million just 3 days later, while the number of contracts traded reached a record 878 on May 13th.

Everything seems to indicate that institutional players have a growing interest in Bitcoin. According to CryptoCompare data, interest in CME Bitcoin derivatives has declined since the collapse of the Bitcoin price on March 12 and 13, falling a further 11.1% to $4.5 billion traded in April.

Towards Public Acceptance of Bitcoin

At the end of 2017, both the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) introduced trading in bitcoin futures contracts. This allowed many previously hesitant segments of the global market to gain greater exposure to this king of cryptocurrency, often considered too dangerous. It has also allowed operators in countries where Bitcoin is illegal or severely restricted to benefit from OTC market movements.

Many believe that the introduction of larger institutional players such as CME, CBOE and Bakkt into the Bitcoin space could be the key to consolidating public acceptance of Bitcoin and driving prices up towards a stabilized moon.

In the case of the Chicago Mercantile Exchange, it launched on Monday 13 January 2020 the much-anticipated Bitcoin options. This launch reflects the currently strongly growing interest in Bitcoin derivatives. According to Skew’s data, Bitcoin options had a strong start to 2019 on almost all exchanges. Non-institutional operators still seem to prefer unregulated exchanges such as Deribit and OKex to regulated exchanges such as CME and Bakkt. But the interest of institutional traders also seems to be growing.

According to a Bloomberg article in January, open interest in Bitcoin futures has increased by 69 percent since the end of the year, reaching a seven-month high. In the past, the Bitcoin derivatives market has had varying effects on the OTC cash price. The rise to an all-time high of USD 20,000 in the run-up to the launch of the first regulated, cash-settled Bitcoin futures contract on the CME is unforgettable.

According to TheBlock, regarding CME’s future plans, despite the launch of new derivative products on competing sites, CME is not preparing to launch new products related to the cryptocurrency market at this time.

“At CME Group, our innovation process starts with our customers — we listen to their feedback so that we can create products and solutions to help them manage their risks. While we are continually talking with our customers about ways to meet their needs, we have no plans to launch any other cryptocurrency products at this time :according to a CME spokesperson.

Written by Laetisia Harson, Project Manager at Magna Numeris



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Magna Numeris

Magna Numeris


Magna Numeris is a startup developing solutions for cryptocurrency users, pushing the boundaries of conventional platforms to help grow the peer-to-peer economy