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CME says crypto ‘flight’ helped drive record futures volume as exchange leapfrogs Binance

CME says crypto ‘flight’ helped drive record futures volume as exchange leapfrogs Binance
Giovanni Vicioso, head of crypto at the CME Group, talked to DL News about the firm’s record-breaking open interest. Credit: Rita Fortunato/DL News
  • Giovanni Vicioso, head of crypto at the CME Group, talked to DL News about the firm’s record-breaking open interest.
  • CME's head of crypto explains how Bitcoin spot ETFs will impact the market.
  • CME recently surpassed Binance as the largest provider of Bitcoin futures contracts.

The CME just overtook Binance as the largest exchange for Bitcoin futures contracts. And the derivatives exchange’s head of crypto, Giovanni Vicioso, says market trends are helping.

The CME’s head of crypto said that his exchange’s record volume of Bitcoin futures contracts is being driven in part by all the recent crypto scandals that have made regulated exchanges more appealing.

“There has been this crypto flight to regulated futures contracts,” Vicioso, global head of cryptocurrency products at the CME Group, told DL News.

Volume reached a record — over $4 billion in trading on the CME Group’s Bitcoin futures contracts product. Open interest in CME’s Bitcoin futures recently jumped to an all-time high of 111,000 contracts, or more than half a million Bitcoin, Coinglass data shows.

Open interest is the total number of contracts currently outstanding in the market. The market’s total open interest in Bitcoin futures is over 465,000 Bitcoin, or almost $17 billion, with the CME Group processing just shy of 24% of that volume.

“The events that occurred last year across the broader crypto market really helped to increase the understanding, appreciation, and the use of our cryptocurrency suite,” Vicioso added.

Though Vicioso didn’t specify, it wasn’t hard to guess what he was referring to. Sam Bankman-Fried, the co-founder of collapsed exchange FTX, was convicted of fraud and other charges in a New York courtroom on November 2.

In a demonstration of its appeal, by October 31, CME’s Bitcoin futures product saw an all-time high of 127 entities holding positions of at least 25 Bitcoin futures contracts, the equivalent of 125 Bitcoin, or $4.5 million.

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Similarly, according to CME data, as of October 31, asset managers held over 9,000 Bitcoin futures contracts on the CME Group — another record.

Increased attention and demand

CME products attract a mix of clients, Vicioso said, including traditional liquidity providers, crypto-focused funds, crypto native lenders, Bitcoin miners, banking firms, ETF providers, and retail traders.

But new participants are wading in. “At the beginning of summer 2020, we started seeing the traditional macro hedge funds enter the space,” said Vicioso. “Hedge funds looking for exposure to this growing and developing asset class. With that we also started seeing some of the larger money managers… I’d say that’s still a developing story.”

So what’s driving all this attention and the surge in open interest? Vicioso says that, aside from market participants needing a “transparent and trusted manner” of gaining market exposure, Bitcoin has a few narratives going for it.

One is the anticipation of regulator approval for a spot Bitcoin exchange-traded fund. Another is the so-called halving due either in April or May.

“There’s also that need to hedge, given a growing global market uncertainty driven by geopolitical and interest rate risks,” Vicioso added. “Volatility in the space has been rising particularly as a play with some of the moves that we’re seeing.”

Bitcoin has soared on optimism that the Securities and Exchange Commission will greenlight applications for spot Bitcoin ETFs — and make the asset more accessible to investors in the US. Even amid competing

BitMEX co-founder Arthur Hayes said global conflict is also a factor.

Waiting for the ETF

In addition to its standard crypto futures contracts worth five Bitcoin or 50 Ether, CME Group also offers micro futures contracts that are 1/10th of a Bitcoin or an Ether.

The CME Group’s Ether micro futures saw more than a 35% rise in open interest from September to October.

Vicioso said the growth of these contracts suggested that retail participants were just as interested as institutions in the firm’s products.

When asked whether a spot Bitcoin ETF might syphon away some of that demand from the CME Group, Vicioso didn’t seem particularly worried.

“It’s hard to predict,” he said. “The spot ETF will expand the ecosystem. Some of these companies introducing these products may market to a new client segment. So it may bring participants that are currently not in the space.”

The more exchange-traded products become available, the more opportunities are created across the board, explained Vicioso.

“Even the ETF providers that come to market may have a use for futures contracts,” he added. “For example, to hedge their own holdings of spot Bitcoin, or to quickly futurise cash that they receive for their ETF product.”

In other words: Bitcoin spot ETF or not, the CME Group is well positioned, he said.

A regulated framework

Founded in 1898 as the Chicago Mercantile Exchange, the CME Group is the world’s largest financial derivatives exchange operator. It had $174 billion in total assets in 2022.

When it comes to crypto, the CME Group specialises in offering cash-settled futures products.

“It’s all cash transactions, you’re just getting your exposure based on the price of Bitcoin, or the price of Ether,” said Vicioso.

“You don’t have to establish a wallet,” he continued. “You don’t have concerns over storage. You don’t have concerns about your coins being hacked. It’s traded within a regulated framework.”

Other protections offered by the exchange include guaranteed settlement of all transactions that occur on the exchange, as CME clearing is the central counterparty.

“You don’t open an account with the exchange,” said Vicioso. “You open up an account with a clearing member of the exchange.”

After the global financial crisis, many regulators mandated that financial firms use third-party firms called clearing houses to post collateral in case one party defaults.

While such middlemen add onerous reporting requirements and can be a drag on settlement times, they spread, thus reduce, counterparty risk.

Crypto’s speed, decentralisation and permissionless features put more risk on the individual investor. That’s a feature, not a bug, among many in crypto.

But the downsides of that ethos were laid bare last month.

Vicioso was quick to highlight that CME’s segregation of funds means there’s no commingling of funds possible — ensuring investors avoid another disastrous FTX situation.

Tom Carreras is a Markets Correspondent at DL News. Got a tip about markets? You can reach out to