CME’s Bitcoin Friday Futures Are Ideal for News Traders: CF Benchmarks

• The weekly expiry limits basis and caps rollover costs, facilitating improved profitability.

Chicago Mercantile Exchange’s (CME) bitcoin (BTC) futures that expire on Friday are ideally suited for news traders looking to bet on key U.S. economic data releases, CF Benchmarks’ CEO Sui Chung said, explaining the performance of the recently launched contracts.

The CME debuted cash-settled Friday futures, sized at one-50th of one BTC with lower margin requirements, on Sept. 30 to make the futures product accessible to retail investors. The so-called BFF contract settles every Friday at 16:00 New York Time and tracks Cf Benchmark’s Bitcoin Reference Rate – New York (BRRNY) variant. A new contract is listed Thursday at 18:00 New York time, allowing market participants to trade the nearest two Fridays at any point in time.

The global derivatives giant registered a first-day trading volume of over 31,000 contracts across two different contract weeks, becoming the exchange’s most successful crypto futures launch ever.

“Unlike monthly contracts, which are influenced by a wide range of events over four weeks, the weekly contracts allow investors to better express views on Bitcoin’s reaction to specific events, such as U.S. macro data releases,” Chung told CoinDesk in an interview.

Bitcoin has emerged as a macro asset since the coronavirus-induced crash of 2020, with short-term traders/speculators making bets by following notable news announcements and data releases like the monthly U.S. inflation figures and the nonfarm payrolls data.

The Friday futures provide several benefits to news traders, including low basis or price differential relative to spot prices, lower rollover costs and more targeted trading strategies.

The shorter duration limits the gap between futures and spot prices, ensuring a lower premium than monthly standard and micro futures contracts. The lower premium means the contango bleed, or the cost incurred from moving positions from the impending expiry to the following Friday expiry, is relatively less than extended duration contracts, leading to improved profitability.

“The reduced time horizon of the weekly contracts generally results in a low basis compared to their monthly counterparts, simplifying analysis for retail traders,” Chung said.

Chung added that the alignment between the Friday futures expiry and the daily NAV calculation of U.S.-listed spot ETFs, most of which refer to the BRRNY, enhances market liquidity. The more liquidity, the easier it is to execute large orders at stable prices, and the more efficient the price discovery mechanism.

Note that on offshore unregulated exchanges, retail traders prefer perpetual futures, which use the funding rate mechanism to keep prices aligned with the spot market. The funding fee is collected from traders every eight hours. These rates are volatile, adding an element of uncertainty and unpredictability.