CME Group Launches Euro Crypto Futures

The owners of one of the world’s largest derivatives exchanges announced that they will offer two new cryptocurrency-based futures products.

CME Group Inc. plans to introduce euro-denominated Bitcoin and Ethereum futures contracts on August 29, pending regulatory review, the company announced in a press release. These latest futures products will be sized at five Bitcoin and 50 Ether per contract. Each will be settled in cash using the CME CF Bitcoin-Euro daily reference rate and the CME CF Ether-Euro reference rate, respectively.

“Euro-denominated cryptocurrencies are the second most traded fiat currency after the US dollar,” said Tim McCourt, global director of equity and currency products at CME. “To date, the EMEA region accounts for 28% of total Bitcoin and Ether futures contracts traded, up more than 5% compared to 2021.”

Based on uncertainty

The products arrive as crypto markets continue to struggle, with Bitcoin down 50% year-to-date and Ethereum down 56%. This prolonged state of volatility is perhaps what has drawn investors to crypto futures, which allow traders to hedge their digital currency cash positions.

“The current uncertainty in the cryptocurrency markets, coupled with the strong growth and high liquidity of our existing Bitcoin and Ether futures, is creating increased demand for risk management solutions from institutional investors outside of the US. USA,” McCourt explained.

However, current trading volumes in the crypto derivatives market dwarf those of spot trading. This could potentially contribute to a lot of market volatility, as futures contracts can intensify the volatility of a given market sentiment. For example, when Bitcoin crashed as much as 30% in May 2021, leveraged positions in futures and options were liquidated, amplifying the liquidation.

The world’s largest financial derivatives exchange launched micro options for Bitcoin and Ethereum earlier this year. CME Group said the contracts would represent a tenth of each cryptocurrency and would be open not only to institutional but also retail traders, for whom the instruments were designed.

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