CME Emerges as Second-Largest Bitcoin Futures Exchange, Approaches Top Spot

The regulated Chicago Mercantile Exchange (CME) is steadily climbing the ranks as one of the largest Bitcoin futures and perpetual futures exchanges in a development reminiscent of the early stages of the 2020-2021 bull run.

With a notional open interest (OI) of $3.54 billion, CME has surged from the fourth position to become the second-largest Bitcoin futures exchange, according to data from Coinglass. 

Notional open interest refers to the U.S. dollar value locked in active or open contracts.

Despite CME’s impressive rise, crypto exchange Binance still holds the top spot, boasting an open interest of $3.83 billion, 8% higher than CME’s.

It is worth noting that CME’s cash-settled futures contracts recently surpassing the 100,000 BTC mark for the first time on record.

Additionally, the exchange now commands a lifetime high share of 25% in the BTC futures market.

CME offers standard bitcoin futures contracts equivalent to 5 BTC, along with micro contracts sized at one-tenth of 1 BTC.

The exchange also provides ether futures contracts with a standard size of 50 ETH and micro futures equivalent to one-tenth of 1 ETH.

Open interest in offshore exchanges primarily revolves around perpetual futures that have no expiry and use the funding rate mechanism to stay in sync with the spot price.

Some market observers interpret CME’s rise as a sign of an institutional-led rally.

Bitcoin has experienced a 27% increase in value this month, driven by ongoing macroeconomic uncertainty and optimism surrounding spot ETFs.

Retail investors have also played a role in this trend, as evidenced by the significant uptick in futures-based ETFs.

ProShares’ bitcoin futures ETF, for instance, witnessed a staggering 420% surge in rolling five-day volume, reaching $340 million last week. This ETF invests in CME’s bitcoin futures.

André Dragosch, head of research at Deutsche Digital Assets, has said that CME’s rise is a result of unwinding bearish positions on offshore exchanges rather than being driven by long futures positions.

According to Dragosch, while CME’s share in BTC futures OI may have increased relative to other exchanges, the aggregate amount of BTC futures and perpetuals OI has not seen a significant increase in BTC terms.

This implies that the recent surge in prices was more likely induced by a short squeeze and a reduction in aggregate open interest.

This take doesn't make sense.

CME's share in $BTC futures OI might have increased relative to other exchanges but the aggregate amount of BTC futures & perps OI has not increased in BTC terms, implying that long futures positions were not the main driver behind the recent… https://t.co/9y6xAcmvzn pic.twitter.com/imHZNib4ls

— André Dragosch | Bitcoin & Macro (@Andre_Dragosch) October 24, 2023

Meanwhile, the anticipation of a spot ETF approval has led to a surge in Bitcoin’s price in recent weeks.

The cryptocurrency rallied towards $35,000 earlier this month, driven by market speculation surrounding the potential approval of a spot ETF.

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