How Will CME’s ‘Micro Bitcoin Futures’ Affect Crypto Markets?

There’s no denying that if the “micro bitcoin futures contract” goes well, it will likely bring greater returns to Chicagoland in the future, but it could also have a huge impact on the cryptocurrency futures market as a whole.

How Will CME's 'Micro Bitcoin Futures' Affect Crypto Markets?

Derivatives marketplace CME Group (CME) announced the launch of “micro Bitcoin Futures” (micro Bitcoin Futures), a new product designed to attract more retail investors and institutional investors looking for trading flexibility, and to provide investors with an effective and cost-efficient new way to fine-tune their Bitcoin exposure to enhance their trading strategies.

At the current price of bitcoin in the cryptocurrency market, this would mean that the average investor could purchase a bitcoin futures contract at Chicagoland for as little as $6,660. Before the launch of “micro bitcoin futures,” investors would have had to pay at least $290,000 to purchase bitcoin futures products through Chicagoland.

Tim McCourt, head of global equity indices and alternative investment products at Chicagoland, said.

When you look at the current price of bitcoin, and how much it has appreciated over the past few months, you know that future futures contract prices could be prohibitively high.”
A futures contract is an “obligation” (Obligation) that allows a trader to buy or sell an asset at a given price at a given date in the future. For example, if you intend to buy 1 BTC at today’s price of $56,660 a few months in the future, you can lock in that price through a futures contract, making this investment model very friendly for hedgers looking to hedge their risk.

On the other hand, futures contracts are also beneficial for cryptocurrency speculators because they can trade, buy and sell assets just like any other market, thus earning the spread between the contract price at the time the bet is signed and the actual market price at a given future date. For arbitrageurs, if they can bet on the spread correctly, they can make a significant profit.

However, it is important to note that if you want to get into the “futures game,” you need to be able to take some risk, as the first bitcoin futures contract was launched by ChiNext in December 2017 with a minimum purchase size of 5 BTC – in 2017, five bitcoin futures contracts were offered. -not too high in 2017, but when we come to four years later in 2021, the value of those five bitcoins has soared to $290,000. In this case, the “micro bitcoin futures contract” effectively lowers the investment barrier, as investors can explore the “futures game” for only about $6,000.

Frankly, the “micro bitcoin futures contract” will appeal primarily to retail traders who price at raw quotes and whose price tolerance is typically poor. ” trading products, as such users also want to allow more leeway in their trading strategies. They have a $6,000 option instead of having to invest in increments of $290,000.

However, the current “micro bitcoin futures contract” master could also deter many people in the future if the price of bitcoin continues to climb, or even reaches higher levels. However, Chicagoland will have a response to this, and according to Tim McCourt, Chicagoland will consider offering different sized contracts if that happens.

In February, Chicagoland launched Ether futures, and according to the data, a record 5,500 contracts were traded in April. The relatively small size of the contract means that the “sensitivity” to price is not too high. For example, the current Ether price has risen more than five times, and even at today’s price, each contract is worth only about $115,000, which is really small compared to the size of the Bitcoin futures contract. However, if the Ether price continues to skyrocket, then Chicagoland is likely to launch a “micro Ether futures contract” as well.

According to Tim McCourt, the launch of the Micro Bitcoin futures contract attracted 6,241 bitcoin trades on the same day, and judging by the numbers, the new product has already had a good run.

During a corporate earnings call in March, Sean Tully, a senior managing director at the exchange, said that Chicagoland had generated $4.7 million in revenue from the bitcoin futures contract product in the first quarter of 2021, up from the previous year. But he went on to note that despite the product’s success, its features limit the number of customers. sean Tully explained that currently your bitcoin futures product contains 5 bitcoins a share, and margin requirements for a contract typically exceed $105,000, clearly limiting the number and type of participants. sean Tully believes that with the new micro bitcoin futures contract, the margin will be 1/50th of what it was, which is about $2,000. As a result, this will open up a much broader potential customer base for the product. On top of that, the notional size of the contract would be 1/50th of the larger contract, or 1/10th of a bitcoin, but at 1/2 the rate of the existing bitcoin futures contract, and at a much lower fee compared to other exchanges.

There’s no denying that if the “micro bitcoin futures contract” goes well, it will likely bring greater returns to Chicagoland in the future, while also having a huge impact on the overall cryptocurrency futures market.

Posted by:CoinYuppie,Reprinted with attribution to:
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