November 28, 2020

A Crypto Investor

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Institutional frenzy: CME becomes 2nd biggest Bitcoin futures market

The CME Bitcoin futures market overtook Binance Futures to become the second-biggest Bitcoin (BTC) futures exchange by open interest. The data shows that the institutional volume is rapidly gaining a larger share of the cryptocurrency market.

On Oct. 10, Skew reported that the CME Bitcoin futures market’s open interest rose sharply by 1,500 contracts. Since then, within three days, the price of BTC surged 9% to over $13,000.

The growing open interest of CME’s futures contracts on BTC is likely to have a positive effect on BTC price, particularly as a recent study found that “CME Bitcoin futures contribute more to price discovery than its related spot markets.”

Bitcoin exchange futures open interest. Source: Skew

A clear spike in institutional demand for Bitcoin in a short period

For many years, the Bitcoin futures market was dominated by two key players: BitMEX and OKEx. In the past year, new-generation futures exchanges began to swiftly expand, which led Binance Futures, Bybit, and Huobi to compete against the likes of BitMEX.

The CME launched its Bitcoin futures contracts on Dec. 17, 2017. Within a span of three years, it evolved into the second-largest BTC futures exchange by open interest, Skew reports.

The term open interest refers to the sum of the value of all long and short futures contracts that are actively open. It is used to gauge the activity of the market by measuring the amount of capital that is deployed onto the futures market.

Data from Skew shows CME now accounts for $790 million worth of BTC long and short contracts. It falls merely $19 million behind OKEx, which has been the dominant futures exchange throughout 2020.