CME Sees Record Open Interest in Bitcoin Futures Ahead of ETF Debut

The amount of money locked in the bitcoin futures contracts on the global derivatives giant Chicago Mercantile Exchange (CME) surged to record highs on Friday as the U.S. Securities and Exchange Commission (SEC) greenlighted futures-based exchange-traded funds (ETF) tied to the cryptocurrency.

• The dollar value of open interest (OI), or the number of futures contracts traded but not liquidated with an offsetting position, stood at $3.64 billion on Friday, marking a more than two-fold rise for the month, according to data provided by bybt. The previous lifetime high of $3.26 billion was recorded during the bull market frenzy in February.

• Glassnode data shows the total number of outstanding contracts on the CME has increased by 60% to 56,410. The spread between the CME-based front-month futures contract, also known as premium or basis, and the spot price has surged from an annualized 1% to over 16% this month alongside bitcoin’s 40% rally to $62,000.

• Activity on the CME has picked up amid increased expectations that in the upcoming weeks several futures-based ETFs may begin trading in the U.S., as well as stronger participation from state-side institutional investors.

• “Speculation about an imminent futures ETF really took off last week as the SEC had been uncharacteristically quiet ahead of the approval deadline for the first of the ETFs on October 18,” said Martha Reyes, head of research at digital asset prime brokerage and exchange Bequant.

• “U.S. institutions, in particular, have been fueling the rally as evidenced by activity on the CME and the basis flippening on the CME over the retail-led exchanges,” Reyes added.

• Activity on the other exchanges have also picked up, albeit at a slower rate, as evidenced from the CME’s jump to the number two position on the list of the biggest bitcoin futures exchanges by open interest.

• The exchange was the fourth largest last month. Total futures open interest across the globe has also risen to over $23 billion for the first time in five months.

• “BTC futures OI has reached highs not seen since May, highlighting growing expectations of the listing in the U.S. of BTC futures ETF,” said Noelle Acheson, head of market insights at Genesis Global Trading, Inc. “One difference between now and then is the higher weighting (11% vs 17%) of cash-margined futures, implying lower leverage overall in the market.”

• The impending futures-based ETFs from ProShares, Invesco, Valkyrie, and others will invest in regulated bitcoin futures contracts like those trading on the CME instead of buying the actual cryptocurrency.

• While the approval of futures-based ETFs is being widely hailed as a an open door for more mainstream money, some observers are still skeptical.

• “Demand for these bitcoin futures ETFs is likely to be disappointing. These could be of interest to a limited audience of institutions that can’t hold spot or derivatives directly, as well as retail investors that prefer the familiarity and convenience of ETFs,” Acheson said.

• “Most investors, however, are more likely to continue to access BTC exposure through spot or derivatives, or through any of the many listed securities or international funds that offer spot BTC exposure,” Acheson added.

• Bitcoin was last seen trading near $62,300, representing a 1.4% gain on the day.