CME (NASDAQ:CME) launched its Bitcoin futures contracts early on December 18, and it has gotten off to an extremely successful start.
The Bitcoin Reference Rate on the CME Bitcoin futures exchange is at $19,448, which is $500 above the global average Bitcoin price of $18,924. The Bitcoin Reference Rate combines the trade flow of major Bitcoin spot exchanges during a specific timeframe.
$35 million in trades occurred with CME launched its Bitcoin futures exchange, with over 370 contracts processed. In contrast, the Cboe (NASDAQ:CBOE) Bitcoin futures exchange processed around 1,000 contracts last Friday. While Cboe processed more contracts that CME, a CME contract is worth more Bitcoins than a Cboe contract (a CME contract equals 5 Bitcoin whereas a Cboe contract only equals 1 Bitcoin). This means that CME actually processed 45% more traders than Cboe.
Despite the debut success of the CME Bitcoin futures, the combined Bitcoin trading of both CME and Cboe only accounts for about $60-$70 million a day. The global Bitcoin exchange market, on the other hand, processes over $13 billion per day.
The Bitcoin futures market is still extremely important though, even with its smaller contribution to global Bitcoin trading and investment. Bitcoin futures make the Bitcoin market available to a large portion of investors that couldn’t access the global Bitcoin market before, including retail traders, institutional investors, investment banks, and hedge funds.
The CEO of Coinbase, Brian Armstrong, said, “Over 100 hedge funds have been created in the past year exclusively to trade digital currency. An even greater number of traditional institutional investors are starting to look at trading digital assets (including family offices, sovereign wealth funds, traditional hedge funds, and more). By some estimates, there is $10B of institutional money waiting on the sidelines to invest in digital currency today.”
Several financial institutions, including JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS), said that they would start clearing Bitcoin futures for their clients.
Nasdaq, the world’s second-largest stock market, will be launching its own Bitcoin futures exchange in the beginning of 2018.
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