• Genesis has introduced a trade that will allow investors to lock in exposure to bitcoin futures end-of-day closing price
  • Basis trade at index close has long been used in traditional equities markets, but this is the first time that it has been applied to crypto

Genesis Global Capital and Akuna Capital have completed the first ever trade that will allow investors to lock in exposure to bitcoin reference rate (BRR). 

The companies have completed the first over-the-counter (OTC) block trade of a basis trade at index close (BTIC) transaction on Chicago Mercantile Exchange bitcoin futures contracts. 

BTIC has long been used in traditional equities markets, but this is the first time that it has been made available for cryptocurrencies. It’s a move that will allow institutional investors to buy or sell as a basis to the reference rate, which, for bitcoin, is the US dollar price of one bitcoin as of 4pm London time. 

BRR aggregates the trade flow of major bitcoin spot exchanges from 3pm to 4pm London time daily. It is intended to serve as a tradable reference rate that marks a type of “end-of-day price” for bitcoin, although the digital asset really trades on a 24/7 cycle. 

“It’s very important for people who are referenced to that benchmark, which is a lot of people, it’s people who traded futures; it’s people who have ETFs that closed at 4pm London; it’s funds that have to mark their NAV at 4pm London,” said Joshua Lim, head of derivative trading at Genesis.  “Over time, more and more people started using it as a reference point, and so it’s important to have a way to trade that.” 

While CME has offered bitcoin futures contracts since 2017 and cash-settled micro futures contracts since March 2021, this new trade offers greater exposure to existing products. Genesis is the liquidity provider for CME’s full suite of bitcoin and ether futures products. 

“This is the first time we’re offering BTIC for our cryptocurrency futures and we’re pleased Genesis is able to support and provide liquidity for BTIC on day one,” said Tim McCourt, CME’s global head of equity index and alternative investment products, in a statement. “This is another example of how we’re providing innovative solutions to clients who want to gain exposure to CME bitcoin and ether futures.”

The news comes as speculation about a potential bitcoin futures exchange-traded product continues to mount. When asked about when or if the US Securities and Exchange Commission would approve such a product, Lim did not name a date, but said the increased volatility is expected. 

If approved, there will likely be a significant inflow of the assets into futures-based products, he said. This will cause a lot of distortions on the CME futures curve as people will be forced to trade that particular instrument, as opposed to now, where that instrument does not have significant demand given the high collateral requirements.

“If there’s an ETF, the AUM on those futures has to increase, the open interest on those futures has to increase, and more people will have to post dollar collateral, which will make funding those positions very expensive,” said Lim. “We’re very interested in seeing how that plays out, because that will result in the futures sort of trading at even higher premiums than they currently do, relative to spot.”

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    Casey Wagner is a New York-based business journalist covering digital assets and macro economics. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in Media Studies.