(Bloomberg) — One of the world’s largest derivatives exchange owners is forging ahead into the cryptocurrency market with two new futures offerings.
CME Group Inc. will introduce Bitcoin and Ether Euro futures on Aug. 29, the company announced Thursday in a press release. They arrive as the crypto market falters. Bitcoin is down about 50% so far this year, while the second largest crypto Ether is down 56%.
Futures contracts, tradeable derivative agreements, helps investors tap into volatile markets like crypto and allows traders to hedge their cash positions in digital currency.
“Ongoing uncertainty in cryptocurrency markets, along with the robust growth and deep liquidity of our existing Bitcoin and Ether futures, is creating increased demand for risk management solutions by institutional investors outside the US,” Tim McCourt, global head of equity and FX products at CME, said in a statement.
The current crypto derivative market holds massive volumes dwarfing spot trading. Binance, the world’s largest crypto exchange where derivatives trading takes place, had volumes of over $51 million in the last 24 hours, according to CoinMarketCap data.
“Euro-denominated cryptocurrencies are the second highest traded fiat behind the US dollar,” McCourt said. “Year-to-date, the EMEA region represents 28% of total Bitcoin and Ether futures contracts traded, up more than 5% versus 2021.”
Bitcoin derivative products often create more volatility in the crypto market, as futures contracts can intensify price increases and decreases. For instance, when Bitcoin plunged as much as 30% one day in May 2021, leveraged-up positions in futures and options were wiped out, with the expected consequence of amplifying the selloff as they had boosted the rally earlier.
CME’s latest futures products will be sized at five Bitcoin and 50 Ether per contract, which will be settled by cash using the daily CME CF Bitcoin-Euro Reference Rate and CME CF Ether-Euro Reference Rate, respectively, according to the company. Both are pending regulatory review.
The crypto futures market is dominated by CME Group and Cboe Global Markets Inc., which announced plans to enter the Bitcoin futures market in early 2017 before CME.
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