CME Group, the world’s largest derivatives marketplace, on Monday said it had launched options on micro Bitcoin (BTC) and micro Ethereum (ETH) futures, adding to the list of crypto-related products offered by the firm.
Liquidity for the new products will be provided by digital assets dealer Galaxy Digital. Galaxy is a mainstay in the institutional side of crypto, and provides liquidity services to several major banks offering crypto products.
CME said today’s launch was in response to growing interest in cryptocurrency exposure from institutional clients. The products are intended to offer traders greater flexibility in keeping crypto exposure in their portfolios.
Micro BTC and ETH represent roughly one tenth of a full token and as such, represent much lower trading values. But changes in the micro price can also be a good indicator of how retail sentiment is in the market, given that most retail traders use micro stakes to hold BTC and ETH exposure.
CME currently offers derivatives on only BTC and ETH. But given growing interest, it may follow asset managers such as Grayscale and CoinShares in branching out into other tokens.
These contracts will offer a wide range of market participants – from institutions to sophisticated, active, individual traders – greater flexibility and precision to manage their exposure to the top two cryptocurrencies by market capitalization.
–Tim McCourt, CME Group Global Head of Equity and FX Products
Crypto derivatives are an important aspect of the market, given that they allow large investment houses to gain exposure to the space without directly purchasing tokens. Cultivating a healthy derivatives market is one of the ways crypto could see mainstream appeal.
Today’s launch marks another step in the growing institutional interest in crypto seen since late-2020. Investments from large trading houses and hedge funds saw crypto market capitalization balloon from less than $1 billion in 2020 to nearly $3 billion in late-2021.
And the institutional money has shown no signs of slowing. Recently, Goldman Sachs said it would begin offering specialized crypto derivative products to its clients, citing growing interest in exposure to the space.
Data also showed that nearly all of Bitcoin’s volumes are dominated by large trading houses.