Ben Strack

CME Group is set to expand its event contracts to include bitcoin futures next month as the derivatives marketplace continues its crypto push.



The product launch, which is pending regulatory review, is set for March 13, the company revealed Tuesday.&nbsp;



CME Group currently offers event contracts — $20-increment, daily expiring products — on a handful of its benchmark futures markets, including gold, silver, copper, and <a href="https://www.cmegroup.com/markets/equities/sp/e-mini-sandp500.html" target="_blank" rel="noreferrer noopener">E-mini S&amp;P 500</a>.



Since CME launched event contracts last September, nearly 330,000 of these contracts have been traded, with 43% coming from E-mini S&amp;P 500 futures. Retail accounts trading these CME event contracts total 1,300. 



Such contracts allow investors to make bets — costing between $0.25 and $19.75 — on an asset’s predicted closing price. This value will vary throughout the trading day as the likelihood of the product closing above the predicted price changes with market movements.&nbsp;



An investor is credited $20 if their prediction is correct, and $0 if their prediction is incorrect.



“These contracts, which track the daily price moves of our deeply liquid benchmark bitcoin futures, offer an innovative, lower-cost way for investors to trade their views on the up or down price moves of bitcoin,” Tim McCourt, CME Group’s head of equity and foreign exchange products, said in a statement.



Event contracts are intended to appeal to “a broad audience of retail investors and market enthusiasts,” a spokesperson told Blockworks, adding that 53% of event contract traders were new to CME Group products, as of the end of 2022.



CME Group began offering bitcoin futures in 2017 and went on to add ether futures in February 2021. The company later launched <a href="https://blockworks.co/cme-group-to-launch-cash-settled-micro-bitcoin-futures">cash-settled micro bitcoin futures contracts</a> and moved in November 2021 to add <a href="https://blockworks.co/cme-group-plots-launch-of-micro-ether-futures">micro ether futures</a>, announced just a week prior to <a href="https://blockworks.co/ether-all-time-high-as-total-market-cap-nears-3-trillion">ether’s all-time high</a> of nearly $4,900.



The marketplace’s crypto futures and options hit an average daily volume of roughly 53,000 contracts in 2022 — up 13% year over year, according to a CME spokesperson. The average daily volume for the company’s bitcoin futures last year reached 10,700 contracts, an increase of 7% from 2021.&nbsp;



CME Group bitcoin futures average daily volume was 9,900 contracts in January, up 33% from December.



The company’s latest product plans come a couple of weeks after CME Group launched non-tradable reference rates and real-time indices — calculated and published daily by CF Benchmarks — for three metaverse tokens: axie infinity (AXS), chiliz (CHZ) and decentraland (MANA).



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CME Group To Offer Retail Traders New Way To Bet on BTC Direction

DeFi, for the most part, has held up better than more-centralized cryptocurrencies as ripple effects from FTX continue to spread throughout the asset class. TradFi is paying attention.



Case in point: CME Group and CF Benchmarks are rolling out institutional-grade tools for the price discovery of a handful of DeFi protocols.&nbsp;



The new reference rates and real-time indexes — for Aave, Curve and Synthetix — are set to launch Dec. 19, the companies said in a statement Thursday. Bitstamp, Coinbase, Gemini, itBit, Kraken and LMAX Digital would initially supply corresponding pricing data.



The rates aim to price each digital asset in dollars daily, and each index is set to refresh once every second. Both types of tools, neither of which are tradable products, look to help institutions and others manage price risk around blockchain-based projects.



CME’s planned DeFi offerings come after the company launched 11 new cryptocurrency reference rates and indexes in April, including Uniswap — a decentralized exchange (DEX).



Along with the existing Uniswap reference rate and index, the three new benchmarks capture more than 40% of the total value-locked (TVL) of DeFi protocols that run on Ethereum, according to <a href="https://www.linkedin.com/in/gvicioso/" target="_blank" rel="noreferrer noopener">Giovanni Vicioso</a>, CME’s global head of crypto products. 



“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects,” Vicioso said in a statement.



A CME spokesperson did not immediately return a request for additional comment.



A subsidiary of <a href="https://blockworks.co/news/kraken-layoffs-30-percent" target="_blank" rel="noreferrer noopener">crypto exchange Kraken</a>, CF Benchmarks is perhaps best known for its reference rates of bitcoin and ether, employed by CME Group to settle its digital asset futures contracts. CME Group began offering bitcoin futures contracts in 2017 and later launched ether futures in February 2021. The marketplace has expanded its crypto products throughout this year, <a href="https://blockworks.co/news/cme-group-to-offer-options-on-ether-futures" target="_blank" rel="noreferrer noopener">bringing options on ether futures</a>, for example, in September. 



CF Benchmarks CEO Sui Chung <a href="https://blockworks.co/news/qa-cf-benchmarks-ceo-says-institutions-more-interested-than-ever-in-crypto" target="_blank" rel="noreferrer noopener">told Blockworks in August</a> that the company had been fielding more calls from traditional financial institutions during the crypto winter than the crypto index provider received during the bull market.



BlackRock CEO Larry Fink said at the <a href="https://www.youtube.com/watch?v=PSVpth7uqb4" target="_blank" rel="noreferrer noopener">New York Times DealBook Summit</a> Wednesday that he <a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal">be</a><a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal" target="_blank" rel="noreferrer noopener">l</a><a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal">ieves in crypto’s underlying technology</a> —  despite the crash of crypto exchange FTX. He added that the tokenization of securities will play a key role when it comes to growth.



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CME Plots More DeFi Products Despite Broader Crypto Carnage

<div id="highlights-block_62fe4ac4f58b4" class="highlights">
 <ul>
 <li>The upcoming Ethereum Merge is one of the most anticipated events in the crypto space, CME Group exec says</li>
 <li>Roughly 3.2 million ether futures contracts have traded since CME Group launched the offering in November</li>
 </ul>
 
</div>



CME Group continues to expand its range of crypto derivatives, revealing Thursday that it is slated to launch options on ether futures on Sept. 12.



The derivatives marketplace currently offers bitcoin options, as well as micro-sized bitcoin and ether options. It began offering bitcoin futures in 2017 and went on to add ether futures in February 2021.



The company launched <a href="https://cms.blockworks.co/cme-group-to-launch-cash-settled-micro-bitcoin-futures/" target="_blank" rel="noreferrer noopener">cash-settled micro bitcoin futures contracts</a> last year and moved in November to add <a href="https://cms.blockworks.co/cme-group-plots-launch-of-micro-ether-futures/" target="_blank" rel="noreferrer noopener">micro ether futures</a>, announced just a week prior to <a href="https://cms.blockworks.co/ether-all-time-high-as-total-market-cap-nears-3-trillion/" target="_blank" rel="noreferrer noopener">ether’s current all-time high</a> of $4,868.



The new contracts — based on the <a href="https://www.cmegroup.com/markets/cryptocurrencies/cme-cf-cryptocurrency-benchmarks.html?redirect=/trading/cryptocurrency-indices/cf-ethereum-reference-rate.html" target="_blank" rel="noreferrer noopener">CME CF Ether-Dollar Reference Rate</a> — deliver one ether futures, sized at 50 ether per contract.



The launch comes as CME Group has seen 1.8 million ether futures contracts traded to date, Tim McCourt, the firm’s global head of equity and foreign exchange products, said in a statement.&nbsp;



&#8220;As we approach the highly anticipated Ethereum Merge next month, we continue to see market participants turn to CME Group to manage ether price risk,” McCourt added.



<blockquote class="wp-block-quote">“Our new Ether options will offer a wide array of clients greater flexibility and added precision to manage their ether exposure ahead of market moving events.&#8221;</blockquote>



Average daily open interest across CME Group’s crypto products was 106,000 contracts in the second quarter, <a href="https://cms.blockworks.co/cme-logs-record-crypto-derivative-trades-in-q2/" target="_blank" rel="noreferrer noopener">an all-time quarterly high</a>. Ether futures, in particular, notched an average daily volume in the second quarter of 6,600 contracts, a record that was up 27% from the first quarter.



The momentum carried over into July, during which daily open interest on CME’s crypto products averaged nearly 127,000 contracts, a spokesperson told Blockworks. More than 3.2 million ether futures contracts have traded in the last eight months.



CME Group said earlier this month that it was set to start rolling out its first <a href="https://cms.blockworks.co/cme-group-rolling-out-first-euro-settled-crypto-derivatives/" target="_blank" rel="noreferrer noopener">euro-denominated bitcoin and ether futures</a>.



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CME Group To Offer Options on Ether Futures

<div id="highlights-block_62ec298cd2be1" class="highlights">
 <ul>
 <li>The Europe, Middle East and Africa region accounts for 28% of total bitcoin and ether futures contracts traded, CME Group exec says</li>
 <li>Daily open interest on CME’s crypto products averaged nearly 127,000 contracts in July — up 59% from the previous month</li>
 </ul>
 
</div>



Derivatives marketplace <a href="https://www.cmegroup.com/" target="_blank" rel="noreferrer noopener">CME Group</a> is set to offer its first euro-denominated bitcoin and ether futures this month after its crypto derivatives <a href="https://cms.blockworks.co/cme-logs-record-crypto-derivative-trades-in-q2/" target="_blank" rel="noreferrer noopener">posted record open interest</a> volumes during the second quarter.



The upcoming cash-settled products are designed to match their US dollar-denominated counterparts. Bitcoin euro futures are set to be comprised of five bitcoins (BTC) per contract, while the ether euro futures are slated to start with 50 ether (ETH).&nbsp;



Tim McCourt, CME’s global head of equity and foreign exchange products, said demand for risk management solutions by institutional investors outside the US is increasing as crypto market uncertainty persists.&nbsp;



Euro-denominated cryptocurrencies are the second-highest traded fiat behind the US dollar, McCourt added. The number of bitcoin and ether contracts traded in Europe, the Middle East and Africa represent about 28% of worldwide totals, he said, which is up more than 5% from 2021.



The upcoming launch comes after CME’s crypto derivatives <a href="https://cms.blockworks.co/cme-logs-record-crypto-derivative-trades-in-q2/" target="_blank" rel="noreferrer noopener">posted record open interest</a> — an average of 106,000 contracts per day — and higher than average daily volumes of 57,000 contracts during the second quarter. 



In July, daily open interest on the exchange’s crypto products averaged nearly 127,000 contracts, a spokesperson told Blockworks, up 59% from the previous month. Average daily volume on those products was roughly 62,000 contracts — about 11% higher than June.&nbsp;



CME began offering bitcoin futures in 2017 and went on to add an ether version in February 2021. The company launched <a href="https://cms.blockworks.co/cme-group-to-launch-cash-settled-micro-bitcoin-futures/" target="_blank" rel="noreferrer noopener">cash-settled micro bitcoin futures contracts</a> — worth 10% of one bitcoin — last year and moved in November to add <a href="https://cms.blockworks.co/cme-group-plots-launch-of-micro-ether-futures/" target="_blank" rel="noreferrer noopener">micro ether futures</a>, as Ethereum liquidity grew. 



“At this time, we have no plans to introduce additional products,” a CME Group spokesperson told Blockworks. “We remain focused on continuing to grow our current suite of crypto offerings.”&nbsp;&nbsp;



Micro ether futures in particular are gaining steam, as more than 3.2 million such contracts have traded in the last eight months, CME Group reported.



Average daily open interest of micro ether futures reached 47,000 contracts in July, while average daily volumes hit nearly 26,000 contracts — up 43% and 41%, respectively, from June.



A CME spokesperson attributed the spike in part to ether’s increasing price, noting that its micro ether contracts settled at $1,014 on June 30. The price of ETH at 3 pm ET was roughly $1,600.&nbsp;



The representative also called <a href="https://cms.blockworks.co/the-investors-guide-to-the-ethereum-merge/" target="_blank" rel="noreferrer noopener">Ethereum’s upcoming Merge</a>, the blockchain’s switch from a <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/" target="_blank" rel="noreferrer noopener">proof-of-work consensus mechanism</a> to a proof-of-stake alternative, “one of the most anticipated events in the crypto space to date.” 



The spokesperson said 78% of micro ether options open interest mature in September or December, suggesting traders are hedging risk ahead of the Merge.



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CME Group Rolling Out First Euro-settled Crypto Derivatives

<div id="highlights-block_62e18632d4166" class="highlights">
 <ul>
 <li>Average daily open interest across CME Group’s crypto products hit 106,000 contracts</li>
 <li>The average daily volume for ether futures was up 27% from the prior quarter</li>
 </ul>
 
</div>



CME Group’s crypto derivatives posted record open interest and higher than average daily volumes during the second quarter — even as the sell-off in digital assets markets intensified.  



Average daily open interest across its crypto products was 106,000 contracts, an all-time quarterly high, according to a report published by the derivatives exchange Wednesday. Average daily volume was about 57,000 contracts — the second-highest quarterly total.



Ether futures, in particular, notched an average daily volume in the second quarter of 6,600 contracts, an all-time high that was up 27% from the first quarter. A record 26,500 contracts traded June 15.



During the third week of June, the combined number of what the company calls large open interest holders for <a href="https://cms.blockworks.co/tag/CME-group/" target="_blank" rel="noreferrer noopener">CME Group</a>&#8216;s crypto futures reached a high of 404, signaling growing interest from institutional investors. 



A CME Group spokesperson did not immediately return a request for comment.



Futures contracts are legal agreements to buy or sell a particular asset at a predetermined price at a specified time in the future. CME futures are dollar cash-settled and are based on a once-a-day reference rate of the underlying asset’s price.



CME began offering bitcoin futures contracts in 2017 and later added ether futures in February 2021. It <a href="https://cms.blockworks.co/cme-group-to-launch-cash-settled-micro-bitcoin-futures/" target="_blank" rel="noreferrer noopener">launched</a> cash-settled micro bitcoin futures contracts — worth one-tenth of one bitcoin — last year and <a href="https://cms.blockworks.co/cme-group-plots-launch-of-micro-ether-futures/" target="_blank" rel="noreferrer noopener">moved in November</a> to add micro ether futures, as liquidity in ether futures grew. 


<div class="wp-block-image">
<figure class="alignright size-medium"><img decoding="async" loading="lazy" width="300" height="222" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/06/McCourt-Tim-UPDATED-300x222.jpg" alt="Tim McCourt, CME Group" class="wp-image-4947" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/06/McCourt-Tim-UPDATED-300x222.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/06/McCourt-Tim-UPDATED-300x222.jpg?w=347 347w, https://blockworks-co.imgix.net/wp-content/uploads/2021/06/McCourt-Tim-UPDATED-300x222.jpg?w=352 352w, https://blockworks-co.imgix.net/wp-content/uploads/2021/06/McCourt-Tim-UPDATED-300x222.jpg?w=295 295w, https://blockworks-co.imgix.net/wp-content/uploads/2021/06/McCourt-Tim-UPDATED-300x222.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/06/McCourt-Tim-UPDATED-300x222.jpg?w=680 680w" sizes="(max-width: 300px) 100vw, 300px" /><figcaption>Tim McCourt, CME Group</figcaption></figure></div>


More recently in March, CME rolled out <a href="https://cms.blockworks.co/cme-group-to-roll-out-micro-bitcoin-ether-options/" target="_blank" rel="noreferrer noopener">options on micro bitcoin and ether futures</a>. Tim McCourt, CME’s global head of equity and foreign exchange products, at the time said the new offering would allow traders of all sizes to manage crypto market exposure with more precision.



The first bitcoin futures-based ETFs <a href="https://cms.blockworks.co/first-bitcoin-futures-etf-nears-1b-on-first-day-of-trading/" target="_blank" rel="noreferrer noopener">hit the market last October</a> after SEC Chair Gary Gensler had <a href="https://cms.blockworks.co/sec-chair-gensler-prioritizes-crypto-platform-crackdown/" target="_blank" rel="noreferrer noopener">hinted in August</a> that the agency would be more comfortable with products limited to CME-traded futures contracts. The SEC has not yet approved an ETF that invests in crypto directly.



Simeon Hyman, head of ProShares’ investment strategy group, <a href="https://cms.blockworks.co/proshares-exec-bitcoin-futures-etf-a-real-robust-and-first-class-solution/" target="_blank" rel="noreferrer noopener">told Blockworks</a> earlier this month that daily volume in the firm’s Bitcoin Strategy ETF (BITO) has eclipsed that of the Grayscale Bitcoin Trust (GBTC). He noted ​​a futures-based ETF is “not at all a second-class citizen” when considering challenges in the spot market.



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CME Notches Record Crypto Derivative Trades in Q2

<div id="highlights-block_621e941905ff3" class="highlights">
 <ul>
 <li>Offerings will allow traders to hedge market-moving events with greater precision, according to CME Group’s global head of equity and foreign exchange products</li>
 <li>CME Group began offering micro bitcoin and micro ether futures contracts last year</li>
 </ul>
 
</div>



Derivatives exchange CME Group is set to roll out options on micro bitcoin and ether futures this month in a move to give more traders exposure to such instruments with nominal capital.



The options contracts, set to launch March 28, will be one-tenth the size of their underlying tokens. CME introduced bitcoin futures contracts, sized at five bitcoin, in 2020.



Futures require the buyer to purchase an asset at a certain date, while options give an investor the right, but not the obligation, to buy or sell an asset before the contract expires.



CME Group began offering bitcoin futures contracts in 2017 and <a href="https://cms.blockworks.co/cme-group-to-launch-cash-settled-micro-bitcoin-futures/" target="_blank" rel="noreferrer noopener">launched</a> cash-settled micro bitcoin futures contracts worth one-tenth of one bitcoin last year. The derivatives marketplace <a href="https://cms.blockworks.co/cme-group-plots-launch-of-micro-ether-futures/" target="_blank" rel="noreferrer noopener">moved in November</a> to add micro ether futures as liquidity in ether futures grew steadily with investors.&nbsp;



About 5.2 million micro bitcoin and micro ether futures contracts have changed hands in less than a year, according to Tim McCourt, CME Group’s global head of equity and foreign exchange products.



“Building on the strength and liquidity of the underlying contracts, our micro-sized options will enable traders of all sizes to efficiently hedge market-moving events with greater precision and flexibility or fine-tune their cryptocurrency market exposure,” McCourt told Blockworks in an email.



As traders favor short-dated options to manage risk, according to McCourt, the launch will feature Monday, Wednesday and Friday weekly expiries for micro crypto options.



Executives at Genesis Global Trading, Cumberland and Akuna Digital Assets said their firms will provide liquidity.



&#8220;We believe that options on these contracts will allow existing market participants greater flexibility when seeking cost-efficient exposure as well as opening the market to new participants who prefer the more granular sizing,&#8221; Akuna CEO John Harris said in a statement.



The launch comes after CME Group launched two new reference rates for bitcoin and ether Monday that provide a daily reference rate of the US dollar price of the two digital assets, published at 4 pm ET.



“We’re continually talking with and listening to clients and market participants about new ways to help them manage cryptocurrency risk,” McCourt said, declining to share specific future crypto products the company has in the works.



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CME Group To Roll Out Micro Bitcoin, Ether Options

<div id="highlights-block_61a547b87f773" class="highlights">
 <ul>
 <li>The Ethereum network will be an integral part of our lives going forward, says Kelly Intelligence’s founder and CEO </li>
 <li>VanEck and ProShares had revealed plans in August to launch Ethereum futures products but subsequently withdrew the applications</li>
 </ul>
 
</div>



Kelly Intelligence is looking to launch an Ethereum futures ETF a little more than a month after the first bitcoin futures ETFs hit the US market.&nbsp;



The Denver-based firm’s proposed actively managed fund would invest in cash-settled ether futures contracts traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC), according to <a href="https://www.sec.gov/Archives/edgar/data/1873280/000089418921008363/kellyethereumfuturesetf485.htm">a regulatory disclosure</a> filed on Monday.&nbsp;&nbsp;



The only such exchange to offer these contracts is the Chicago Mercantile Exchange (CME), which rolled out ether futures contracts earlier this year after unveiling bitcoin futures contracts in December 2017.&nbsp;



CME earlier this month announced that it would <a href="https://cms.blockworks.co/cme-group-plots-launch-of-micro-ether-futures/">add micro ether futures</a> — sized at one-tenth of one ether — on Dec. 6.&nbsp;



CME Group executives said at the time that the micro ether futures offering would provide an efficient, cost-effective way for individual and institutional investors to hedge their ether price risk or more nimbly execute ether trading strategies. The plans came as liquidity in ether futures contracts has steadily grown among institutional traders since their launch in February, the CME leaders added.



<blockquote class="wp-block-quote">“Kelly Intelligence’s interest in ether is predicated on the fact that we are at the start of the fourth industrial revolution &#8211; what we call the intelligence revolution — where the Ethereum network will be an integral part of our lives going forward,” Kevin Kelly, the firm’s founder and CEO, told Blockworks in an email.</blockquote>



Kelly declined to comment specifically on the filing or potential conversations the firm has had with regulators.&nbsp;



The planned Kelly Ethereum Ether Strategy ETF may replace futures contracts approaching expiration with similar contracts that have a later expiration, the filing notes.



In addition to ether futures contracts, the fund may invest in pooled investment vehicles and exchange-traded products that provide exposure to ether. It would not invest in ether or other digital assets directly.



Penserra Capital Management is slated to subadvise the fund. The filing does not indicate an expense ratio for the proposed offering.



<h3>Bitcoin futures ETFs</h3>



The filing follows the launch of several bitcoin futures ETFs. The first of which, the ProShares Bitcoin Strategy ETF (BITO), has grown to roughly $1.4 billion in assets under management since its Oct. 19 debut. The US Securities and Exchange Commission (SEC) has not yet greenlit ETFs that would invest in bitcoin directly.



VanEck and ProShares had revealed plans in August to launch <a href="https://cms.blockworks.co/vaneck-and-proshares-apply-for-ethereum-futures-etfs/">Ethereum futures products</a> but subsequently <a href="https://cms.blockworks.co/vaneck-proshares-seek-to-withdraw-requests-to-launch-ethereum-etfs/">withdrew the applications</a>. Some industry professionals said at the time that the SEC likely told the issuers that such products would not be approved any time soon.



Trey Griggs, CEO for GSR’s US business, <a href="https://cms.blockworks.co/when-could-an-ethereum-futures-etf-hit-the-us-market/">told Blockworks last month</a> that he believed Ethereum had sufficient trading history for the SEC to approve a futures-based product. But the market for ether futures is likely not liquid enough to support the volume of inflows that an ETF could trigger, Noelle Acheson, head of market insights at Genesis, said at the time.&nbsp;



Bloomberg Intelligence ETF Analyst James Seyffart said in October that an Ethereum futures-based ETF could launch sometime in the first half of 2022, noting that he believes one will launch before a spot bitcoin ETF.&nbsp;

Kelly Intelligence Plans Ethereum Futures ETF

<div id="highlights-block_618161f22c190" class="highlights">
 <ul>
 <li>Ether, at about $4,500, is up roughly 170% since CME’s February launch of ether futures contracts</li>
 <li>Micro ether futures to follow CME’s introduction of micro bitcoin futures in May</li>
 </ul>
 
</div>



CME Group announced Tuesday its plan to add Micro ether futures as liquidity in ether futures contracts has steadily grown among institutional traders since their launch earlier this year.&nbsp;



The new contract will be cash-settled and will be based on the <a href="https://www.cmegroup.com/trading/cryptocurrency-indices/cf-ethereum-reference-rate.html" target="_blank" rel="noreferrer noopener">CME CF Ether-Dollar Reference Rate</a>, which serves as a once-a-day reference rate of the US dollar price of ether. Micro Ether futures will be listed on CME and subject to its rules.  



The upcoming launch, planned for December 6, is pending regulatory approval. The new offering comes after CME introduced cash-settled <a href="https://cms.blockworks.co/cme-ether-futures-launch-quietly-but-with-big-industry-implications/">ether futures con</a><a href="https://cms.blockworks.co/cme-ether-futures-launch-quietly-but-with-big-industry-implications/" target="_blank" rel="noreferrer noopener">t</a><a href="https://cms.blockworks.co/cme-ether-futures-launch-quietly-but-with-big-industry-implications/">racts</a> in February, noting at the time that the product would be an additional tool for investors amid the demand for and growth of bitcoin futures and options markets.  



Since CME’s ether futures launch in February, more than 675,500 contracts have traded. Ethereum’s price has gone up about 170% in that span, according to Giovanni Vicioso, CME Group’s senior director of equity and alternative investment products.



Ethereum had a price of $4,520, as of Noon ET, according to <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">CoinGecko</a>. Its market capitalization was roughly $535 billion at that time, which is nearly half of bitcoin’s. 



<blockquote class="wp-block-quote">“We’ve had requests from clients who are interested in accessing ether using our contract either for exposure or to manage ether price risk…for a smaller contract,” Vicioso told Blockworks. </blockquote>



Micro ether futures are sized at one-tenth of one ether. The new offering will provide an efficient, cost-effective way for individual and institutional investors to hedge their ether price risk or more nimbly execute ether trading strategies, company executives said.



CME unveiled bitcoin futures contracts in December 2017 and added <a href="https://www.cmegroup.com/trading/micro-bitcoin-futures.html" target="_blank" rel="noreferrer noopener">micro bitcoin futures</a> — also one-tenth the size of one bitcoin — in May. Micro Bitcoin futures have traded more than 2.7 million contracts since then.



Since CME’s ether futures launch in February, about 2,200 accounts have traded the product, Vicioso noted. Ether futures averaged 53 large open-interest holders — an entity that holds at least 25 contracts — in October. Bitcoin futures did not reach that level of large open-interest holders until more than two years after it launched, he explained.&nbsp;



Ether futures volume, which represented about 5% of bitcoin futures volume earlier this year, grew to about 80% of bitcoin futures volume in September, the executive added.



“Ether [futures] has really had a much quicker adoption in terms of institutions and sophisticated traders that are accessing that contract,” Vicioso said.



Discussion around crypto futures contracts has ballooned recently amid the launch of the first bitcoin futures ETFs in the US last month. Industry professionals <a href="https://cms.blockworks.co/when-could-an-ethereum-futures-etf-hit-the-us-market/" target="_blank" rel="noreferrer noopener">have shared various opinions</a> of when an Ethereum futures ETF could launch, with Bloomberg Intelligence Analyst James Seyffart predicting one could hit the market in the first half of 2022.



Vicioso called the bitcoin futures ETF launches a milestone but declined to comment on potential ether futures ETFs.



“Certainly, ETFs are a welcome addition and a complementary product to the futures,” he said.

CME Group Plots Launch of Micro Ether Futures

<div id="highlights-block_617b02fe89410" class="highlights">
 <ul>
 <li>Bloomberg Intelligence analyst says he believes Ethereum futures ETF could come in first half of 2022, before a bitcoin spot ETF </li>
 <li>Reasoning behind ProShares and VanEck withdrawing Ethereum futures ETF applications in August remains unclear</li>
 </ul>
 
</div>



With two bitcoin futures ETFs already on the market and more apparently on the way, industry professionals have weighed in on when an Ethereum futures ETF could launch.



In the days after the launches of the <a href="https://cms.blockworks.co/proshares-bitcoin-futures-based-etf-to-begin-trading-tuesday/">ProShares Bitcoin Strategy ETF</a> (BITO) and the <a href="https://cms.blockworks.co/valkyries-btf-trades-10m-in-first-5-minutes/">Valkyrie Bitcoin Strategy ETF</a> (BTF), issuers have filed for other bitcoin ETFs that would not invest directly in the crypto asset.



Valkyrie followed up its launch by <a href="https://cms.blockworks.co/valkyrie-files-for-leveraged-bitcoin-futures-etf/" target="_blank" rel="noreferrer noopener">filing on Tuesday</a> for a leveraged bitcoin futures ETF, which would provide 1.25x exposure to the bitcoin reference rate. Another offering <a href="https://cms.blockworks.co/proposed-direxion-etf-would-offer-short-exposure-to-bitcoin-futures/" target="_blank" rel="noreferrer noopener">proposed by fund issuer Direxion</a> would offer managed short exposure to bitcoin futures contracts.&nbsp;&nbsp;&nbsp;



“I don’t think that the SEC is going to divert its attention to an Ethereum ETF in the very near term,” said Trey Griggs, CEO for GSR’s US business. “But once they’ve gone through this stack of BTC applications … then I think they can very quickly turn their apparatus to an Ethereum futures-based ETF.”



After launching bitcoin futures contracts in 2017, derivatives marketplace CME Group launched Ether futures in February. Ethereum’s price was 4,266.68, as of about 4 p.m. ET on Thursday, according to <a href="https://www.coingecko.com/en?__cf_chl_jschl_tk__=pmd_Cd0RaQP3J.B9YNlXCu26XCWcAQbkdfZOh.GHCHvcvx4-1635427247-0-gqNtZGzNAiWjcnBszQj9" target="_blank" rel="noreferrer noopener">CoinGecko</a>. Its market cap of roughly $500 billion is nearly half of bitcoin’s.



“I believe Ethereum has sufficient trading history,” Griggs told Blockworks, noting that the SEC could allow a futures-based product to launch by the end of the year. “They may argue that it doesn’t, so if there is a delay it will likely be based on the lack of multiple years of trading observations.



“In terms of the analytics and the research and all of the data that they require in order to approve an ETF, including the regulatory footprint and oversight,” he added, “all of those boxes have been checked.”



But the market for Ether futures is currently unlikely to be liquid enough to support the volume of inflows that an ETF could trigger, according to Noelle Acheson, head of market insights at Genesis. Over the past month, Ether futures volumes on the CME have been less than 30% those of bitcoin futures, she noted.



In addition to liquidity concerns, Acheson said that there is still no regulatory clarity on whether ETH is or is not a security, which would likely prevent the SEC from allowing Ethereum ETFs.



Bloomberg Intelligence ETF Analyst James Seyffart told Blockworks that there was about $3 billion in open interest in the bitcoin futures market at the time the SEC began to favor such a product. Ethereum open interest is just over $1 billion, up from about $600 million at the end of September, which means the SEC will likely wait a bit longer.



Seyffart predicts an Ethereum futures-based ETF could launch sometime in the first half of 2022, noting that he believes one will launch before a spot bitcoin ETF.



“The SEC’s probably just going to wait and see how these bitcoin futures ETFs operate,” he added. “Assuming there’s no issues, I don’t see why they could stop, or would stop, an Ethereum futures ETF.”



<h3>Which issuers are looking to Ethereum?</h3>



VanEck was the first fund manager this year <a href="https://www.sec.gov/Archives/edgar/data/1860788/000093041321001047/c101690_s1.htm" target="_blank" rel="noreferrer noopener">to apply</a> for an Ethereum Trust in May, which would physically hold the crypto asset. WisdomTree Investments followed that up with <a href="https://www.sec.gov/Archives/edgar/data/0001864519/000119312521175426/d153307ds1.htm" target="_blank" rel="noreferrer noopener">a filing of its own</a> later that month, and most recently, Kryptoin in August <a href="https://cms.blockworks.co/kryptoin-files-to-launch-ethereum-etf/" target="_blank" rel="noreferrer noopener">filed for a similar product</a>.



After filing for bitcoin futures ETFs, VanEck and ProShares had also revealed plans in August to launch <a href="https://cms.blockworks.co/vaneck-and-proshares-apply-for-ethereum-futures-etfs/" target="_blank" rel="noreferrer noopener">Ethereum futures products</a>. Both fund managers subsequently <a href="https://cms.blockworks.co/vaneck-proshares-seek-to-withdraw-requests-to-launch-ethereum-etfs/" target="_blank" rel="noreferrer noopener">withdrew the applications</a> for those proposed ETFs.&nbsp;



Some industry professionals said at the time that the SEC likely told the issuers that such products would not be approved any time soon.



A ProShares spokesperson declined to comment on the reason for the withdrawal, and a representative for VanEck did not immediately return Blockworks’ request for comment.



The SEC declined to comment on their view on Ethereum futures-based ETFs and whether the agency had instructed VanEck and ProShares to withdraw their applications. But SEC Commissioner Hester Peirce previously said in an interview with Blockworks that the SEC was focused on bitcoin-based products.



Nathan Geraci, president of The ETF Store, previously said that he expects most issuers that launch a bitcoin futures ETF to also pursue an Ethereum futures fund.



“If an issuer has made the decision to pursue a crypto presence, why limit to a single crypto asset at this early stage?” he noted.



<h3>What will the demand be?</h3>



ProShares’ BITO has about $1.2 billion assets under management after trading for 10 days. Valkyrie’s BTF <a href="https://cms.blockworks.co/valkyries-btf-trades-10m-in-first-5-minutes/" target="_blank" rel="noreferrer noopener">traded $10 million in its first five minutes</a> on the market, and has grown to $53 million in AUM in its first six days.&nbsp;



Though demand for Ethereum futures ETF might not reach the day-one interest seen from the BTC products, it would be high, Griggs said. He noted that GSR is seeing a “dramatic desire” for institutions and other investors to gain access to altcoin liquidity.&nbsp;



“Despite the robust interest you saw in the BTC [futures] ETF, I think most of the marketplace felt that if they wanted to gain access to bitcoin, they could figure out how to do that and didn’t necessarily need an ETF,” the CEO explained.&nbsp;



Seyffart agreed there would likely be significant demand for such Ethereum products, but they would likely see less interest than the bitcoin futures ETFs.



“This digital gold thesis … is definitely more viable for the traditional financial crowd,” he said. “Obviously the whole DeFi system is basically built on Ethereum, so I’m sure that interests tons of people too.”

When Could an Ethereum Futures ETF Hit the US Market?

<div id="highlights-block_61267c0baa5f9" class="highlights">
 
</div>


<div id="highlights-block_61267cb0aa5fa" class="highlights">
 <ul>
 <li>Citi “being very thoughtful” about its approach on crypto given the questions around regulatory frameworks and supervisory expectations </li>
 <li>Potential plans to trade futures would follow similar moves by Goldman Sachs and Bank of America in recent months </li>
 </ul>
 
</div>



Citigroup is looking into trading bitcoin futures contracts on the Chicago Mercantile Exchange (CME) following moves by other banks to provide their clients with crypto exposure.



The global bank is considering products such as futures for some of its institutional clients given the strong regulation that such investment offerings operate under, a Citi spokesperson told Blockworks.



“Our clients are increasingly interested in this space, and we are monitoring these developments,” the representative said. “Given the many questions around regulatory frameworks, supervisory expectations, and other factors, we are being very thoughtful about our approach.”



Citi provides consumers, corporations, governments and institutions various financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. It has about 200 million customer accounts and operates in more than 160 countries and jurisdictions.&nbsp;



The company’s potential plans come several months after <a href="https://cms.blockworks.co/goldman-sachs-doubles-down-on-crypto-with-derivatives-trading-team/">Goldman Sachs announced</a> a digital assets strategy involving offering bitcoin derivatives to clients and opening a dedicated trading desk for cryptocurrency. The Wall Street giant named Galaxy Digital the liquidity provider <a href="https://cms.blockworks.co/goldman-sachs-teams-with-galaxy-to-meet-institutional-digital-asset-demand/">for its bitcoin futures block trades</a> through CME Group in June.&nbsp;



Last month, Bank of America was also reportedly <a href="https://cms.blockworks.co/bank-of-america-reportedly-to-offer-bitcoin-futures-trading/">set to use bitcoin futures</a> through CME Group shortly after it <a href="https://cms.blockworks.co/bank-of-america-launches-cryptocurrency-research-effort/">began research coverage</a> of cryptocurrency and digital assets.



“I expect that traditional Wall Street will try to get creative on how to benefit from crypto without diving in head-first,” David Tawil, president of ProChain Capital, previously told Blockworks. “It’s more likely that they will be forced [rather] than take the initiative.”



Outside of trading bitcoin futures, banks have shown more willingness to enter the crypto space. In July, <a href="https://cms.blockworks.co/jpmorgan-reportedly-to-allow-clients-to-access-crypto-funds/">JPMorgan reportedly</a> became the first large US bank to allow its financial advisors to give all its wealth management clients access to cryptocurrency funds.&nbsp;



Morgan Stanley confirmed in April that it was offering certain clients — individual investors with at least $2 million or investment firms with $5 million or more — exposure to bitcoin through two external crypto funds.



<meta charset="utf-8">Want more investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a> September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.

Citi Considering Trading Bitcoin Futures

Casey Wagner

<div id="highlights-block_60ccc20e83ef3" class="highlights">
 <ul>
 <li>The company launched its micro future option in early May 2021 </li>
 <li>Managing director Tim McCourt says the exchange has seen volumes remain pretty resilient during the latest bitcoin drawdown, which is not something that they have seen in the years previously</li>
 </ul>
 
</div>



The price may be stalling, but institutional and retail demand for bitcoin is stronger than ever, CME Group said.&nbsp;



“What&#8217;s interesting is when we saw the run-up in price, there certainly was a corresponding upwelling of institutional interest,” said Tim McCourt, managing director and global head of equity product at CME Group. “More and more firms and institutions were allocating part of their portfolio to bitcoin, that still remains the case based on our conversations with clients.”&nbsp;



The world’s largest financial derivatives exchange started offering bitcoin futures contracts in late 2017, right as the digital asset was approaching $20,000 for the first time.&nbsp;



CME Group launched its micro future option in early May 2021 after receiving feedback from users that the original bitcoin futures contracts were too large. Similar to their predecessor, micro bitcoin futures are cash-settled to the CME CF Bitcoin Reference Rate, which is a once-a-day reference rate of the U.S. dollar price of bitcoin.&nbsp;



“The micro contract is 1/10 of one bitcoin, 1/50 is the size of the five bitcoin future, and it is just a more precise tool,” said McCourt. “It allows clients to more precisely hedge, they can deploy more precise trading strategies, they can scale their positions up and down throughout the day, it&#8217;s really been a benefit to all types of clients, from institutions to active individual traders.”&nbsp;



The demand McCourt mentioned appears to be real. In the first month, micro bitcoin future trading volume reached more than 650,000 total contracts traded across seven expirations.&nbsp;



While trading volume across <a href="https://cms.blockworks.co/how-booming-exchanges-are-prepping-for-a-bear-market/" target="_blank" rel="noreferrer noopener">exchanges surged</a> earlier this year, bitcoin’s recent sell-off has many anticipating a retreat from investors. The largest digital currency has tumbled nearly 35% in the past three months, in part due to <a href="https://cms.blockworks.co/crypto-crash-when-musk-the-environment-tax-day-and-china-collide/" target="_blank" rel="noreferrer noopener">environmental</a> and security concerns. 



“When we see the drawdown in the bitcoin price, back to the $38,000 to $39,000 level where we are now in the futures market, certainly that may take some of the buy-side bias out of the equation, just with any type of asset sell-off,” said McCourt. “What&#8217;s interesting is this type of price action is a key reminder that there&#8217;s a need to manage risk if you&#8217;re already in bitcoin, or if you&#8217;re already in cryptocurrency. In general, we&#8217;ve seen volumes remain pretty resilient in this drawdown, which is not something that we saw in the years previously.”&nbsp;



Long-time crypto investors are no strangers to price volatility. 2018’s bear market, often dubbed the ‘crypto winter,’ saw a large rotation out of digital assets. But McCourt said this rally is different.&nbsp;



“I think it&#8217;s a balance of people having increased risks to manage as the price moves more as well as people continuing to invest in and allocate to bitcoin,” McCourt said. “The personality of the market continues to evolve. From our perspective, we are very pleased with the way the market has worked, both when the price has been up and during the slight retracement here to the 40,000 level as well.”&nbsp;