CME Becomes Biggest Bitcoin Futures Trading Platform

The Bitcoin (BTCUSD) price surge last December led to an increase in open interest and trading volume for Bitcoin futures on the Chicago Mercantile Exchange (CME) as traders sought to hedge their positions in Bitcoin in the spot market by opening futures positions on the exchange. This, in turn, helped the exchange become the world’s largest trading exchange for Bitcoin futures by trading volume.

According data from skew.coma crypto analytics platform, CME accounted for 19.09%, or $2.1 billion of the $11 billion in global open interest for Bitcoin in futures markets worldwide, ahead of China’s OKEx.

Key points to remember

  • The surge in Bitcoin prices led to record trading volumes at CME last year.
  • The number of large interest orders opened on the exchange also multiplied, indicating a strengthening of institutional interest.
  • The Chicago-based exchange has become the world’s largest exchange for trading Bitcoin futures.

Earlier this week, CME reported that the average daily Bitcoin futures trading volume at CME reached 11,179 contracts in December, a 114% increase from the same period a year ago. Average daily open interest, or the number of open futures positions that have not been settled, for the same period reached 11,701 contracts, up 252% from December 2019.

Both figures are the culmination of a year of rising Bitcoin prices. Between January 2020 and December 2020, the price of Bitcoin skyrocketed around 319% and surpassed the previous price record of $20,000.

As cryptocurrency garnered media and investor attention, a similar story unfolded on other derivatives exchanges. Again, skew.com reports that cryptocurrency futures trading volume hit $1.06 trillion in December 2020, up from $282.6 billion in December 2019.

A sign of institutional interest

The evolution of trading volume figures for Bitcoin futures at CME is notable for two reasons.

First, the increase came after a prolonged price drop. The exchange introduced Bitcoin futures to much fanfare during the 2017 crypto bull run. A subsequent price crash diminished trading volumes on the site, and institutional traders, who needed to fuel the market at bitcoin term, have lost interest in its products. That is, until Bitcoin’s reversal of fortunes last year. CME announced that it added 3,050 new trading accounts in 2020, an increase of 84% over 2019 figures.

Second, the increase in CME’s trading volume could be an indicator of institutional interest in Bitcoin futures. While other exchanges have racked up higher dollar trading volume figures, CME’s regulatory and liquidity advantage, coupled with its pedigree and position as the world’s leading exchange for futures trading, offers investors institutional and large traders a degree of comfort that is absent at new crypto exchanges.

The number of large interest holders open to the exchange rose 121% to a record high of 97 during the fourth quarter of 2020. At the start of the month, that figure was even higher at 110. The exchange said that the rising numbers indicated “strengthening institutional interest” in its futures product. Interestingly, around 42% of trading volume on the exchange came from traders outside of the United States.