CME Becomes Largest Bitcoin Futures Market

CME Becomes Largest Bitcoin Futures Market

Last updated on December 7th, 2022 at 08:21 pm

Buoyed by rising institutional demand, the Chicago Mercantile Exchange (CME Group) has become the largest Bitcoin futures market. The exchange started offering Bitcoin futures products three years ago. However, since its launch, crypto derivatives demand has risen tremendously.

Last month, investment manager Wilshire Phoenix published report that showed that the CME Bitcoin futures had more to contribute when it comes to price discovery as compared to its related spot markets.

Apart from the exchange’s growth in open interests and trading volume, it’s influence on spot price formation has been great as well. It shows CME Bitcoin has grown to the level of being the leader in the industry, Wilshire stated.

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Two  Events Contributed To Rise

Last month the CME Group became the second-largest derivatives market for Bitcoin futures when it comes to open interest. Two major events helped to push the exchange’s futures above its competitors.

First, is the legal issue surrounding the derivatives exchange Bitmex, while the second is the crypto support announced by Paypal.

So, while Bitmex was swimming in a mess, the CME was getting endorsed by payment giant Paypal. These two events contributed massively to the rise of the exchange.

It wasn’t all that long ago when the CME edged out one of it’s major competitors in the Bitcoin futures market. In January, the CME passed Bakkt, this after Bakkt launched its Bitcoin futures in September of 2019.

The past few months have seen the high growth of financial derivatives products for Bitcoin. The regulated derivatives market at the CME has doubled each month as incoming interest has led to more demand for CME’s Bitcoin future.

Increased Institutional Involvement

Generally, the figures of the CME Bitcoin futures are regarded as the closest thing existing that measures the institutional involvement in Bitcoin.

Crypto research firm Arcane, in a recent tweet, pointed out that the CME has broken the record and it’s now leading all other exchanges when it comes to the Bitcoin futures market.

On November 18, there was a report from the research firm that the open interest on Bitcoin futures at the CME had surpassed $1 Billion for the first time, reaching $1.16 Billion. With the growth, it has overtaken OKEx, which has $1.07 billion open interest futures. This growth signifies a possible investment rush by institutions.

Open interest determines the number of outstanding futures contracts that haven’t been settled. It gives a clear picture of the market popularity of an asset.

Arcane thinks that the high growth recorded by CME is evidence that institutional investors are gradually flooding the Bitcoin futures market. This growth has also been fueled by the recent moves in Bitcoin’s price which has again drawn attention to the top digital asset.

On September 27, On-chain analysts Willy Woo predicted that Bitcoin will decouple from the stock market and it will be driven by what he called “internal adoption.”

He noted that the move will be coming primarily due to long-term holders and not because of traders moving funds to hedge positions. But the latest figures showed that even after the Thanksgiving selloff, Bitcoin has attracted more investors, especially the institutional investors who can have a massive impact on the Bitcoin futures market.


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