CME: Cash-settled Bitcoin futures contracts are the popular choice

The Chicago Mercantile Exchange (CME) Group recently stated that there are currently no plans to introduce physically settled bitcoin futures contracts.

The Global Head of Stock Indexes and Alternative Investment Products at the Chicago Mercantile Exchange (CME), Tim McCourt, stated in an interview on October 1:

The introduction of all new contracts or products is driven by customer demand, and the current high demand from customers is for cash-settled Bitcoin futures.

Originally Planned Physical Settlement Contracts for 2020

The CME cash-settled contracts went live in December 2017, with plans to launch options in the first quarter of 2020 pending regulatory review. McCourt claimed:

Since the introduction of futures products, the number one demand from customers has always been our Bitcoin futures contracts.

As of now, the CME has had 20 futures expirations, involving over 3,300 trading accounts. From the beginning of this year, an average of 7,000 Bitcoin futures contracts have been traded daily, approximately 35,000 Bitcoins, breaking the trading volume record set in May this year.

Increasing Institutional Interest in Bitcoin

It is understood that major participating institutions currently include hedge funds, commodity trading advisors, asset management firms, and cryptocurrency trading firms, with a focus on hedge funds and trading companies. McCourt pointed out:

Institutional interest in Bitcoin is growing, but they need time to familiarize themselves with the market and obtain permission to trade new products.

Bakkt's Physically Settled Futures Contracts

According to previous reports by ABM, the market response was tepid after Bakkt's "physically delivered" Bitcoin futures went live, with Bitcoin even experiencing a significant drop, leaving many wondering whether the so-called "institutional market" would benefit Bitcoin or not.

The slow introduction of new products is considered one of the factors contributing to the recent weakness in Bitcoin prices. In addition, ABM has reported that there is a certain correlation between Bitcoin prices and the settlement of CME futures contracts, with Bitcoin prices usually falling before the CME settlement.

Out of the total 20 settlement days at CME, only 5 days saw price increases. On average, Bitcoin prices fell by 1.99% on the day of CME settlement.

So far this year, on settlement days, significant drops were seen in April, May, June, and August. Various data indicate one thing: the futures market has a significant impact on Bitcoin price movements.

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