Record-Breaking Q2 Participation in Bitcoin, Ether Futures on CME by Large Investors

• Large traders participated in record numbers in CME’s Bitcoin and Ether futures in the second quarter.
• This record participation is attributed to increasing institutional interest, as investors seek regulated platforms to manage risk and exposure amidst rising market volatility.

The second quarter of 2023 saw an unprecedented level of large trader participation in Bitcoin and Ether futures on the Chicago Mercantile Exchange (CME), a leading global derivatives marketplace. This escalating activity underscores the increasing institutional interest in the cryptocurrency sector.

Record-Breaking Institutional Interest in BTC and ETH Futures

The CME reported that the number of large open interest holders, defined as entities holding a minimum of 25 Bitcoin futures contracts, averaged a record 107 in Q2. Additionally, Ether’s large open interest holders saw an average of 62 throughout the same quarter.

This growing institutional interest was stimulated by investors’ search for regulated platforms and products. This need became increasingly important as a strategy to hedge against the rising market volatility and manage risk and exposure. The CME’s Bitcoin and Ether futures are regulated by the Commodity Futures Trading Commission (CFTC), providing a sense of security to institutional investors.

The standard Bitcoin futures contract on CME equates to 5 BTC, and the micro contract represents one-tenth of 1 BTC. Similarly, the standard Ether futures contract size is 50 ETH, with micro futures equating to one-tenth of 1 ETH. The regulated and cash-settled nature of CME’s futures have positioned them as a favored choice for institutions seeking cryptocurrency exposure without owning the digital assets.

The first half of 2023 saw a rally in the top cryptocurrencies, with Bitcoin appreciating by 7% in the three months leading to June, translating into an 84% increase for the first half of the year. Ether saw gains of 61% during the same period.

Concurrent with the rally, demand for hedging tools spurred trading volumes and open interest in BTC and ETH futures and options to unprecedented highs in the first half of the year, as reported by the CME.

The terms “trading volume” and “open interest” refer to the number of contracts transacted on a specific day and the number of active contracts at any given moment, respectively. Hence, an increase in open interest signifies an inflow of new money into the market.

Standard Bitcoin futures contracts’ open interest averaged a record 14,800 contracts through the first half, marking a 15% rise compared to 2022. Bitcoin options’ open interest also set a record, averaging 9,400 contracts, reflecting an impressive 175% increase compared to the previous year.

CME is set to further expand its offerings, planning to list futures tied to the ether-bitcoin ratio later this month, subject to regulatory approval. The exchange has also broadened its options product suite by listing weekly Bitcoin and Ether expiries.