CME Group Launches Euro Crypto Futures
The owners of one of the world’s largest derivatives exchanges announced that they will offer two new futures products based on cryptocurrency.
CME Group Inc. plans to introduce 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 have a size of five Bitcoin and 50 Ether per contract. Each will be settled in cash using the daily CME CF Bitcoin-Euro reference rate and CME CF Ether-Euro reference rate respectively.
“Euro-denominated cryptocurrencies are the second most traded fiat behind the US dollar,” said Tim McCourt, global head of equity and currency products at CME. “To date, the EMEA region represents 28% of total Bitcoin and Ether futures contracts traded, up more than 5% compared to 2021.”
Signs of uncertainty
The products come as crypto markets continue to struggle, with Bitcoin down around 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 from institutional investors outside the US,” explained McCourt.
However, current trading volume in the crypto derivatives market dwarfs that of spot trading. This can potentially contribute to major market instability since futures contracts can amplify the volatility of a given market sentiment. For example, when Bitcoin plunged up to 30% in May 2021, leveraged positions in futures and options were liquidated, which then fueled the selloff.
The world’s largest financial derivatives exchange launched micro options for Bitcoin and Ethereum earlier this year. CME Group said the contracts will represent one-tenth of each cryptocurrency and be open not only to institutional but also to retail traders, for whom the instruments are designed.
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