CME Bitcoin Futures Open Interest Surges to Record 21% as Institutional Participation Increases

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Bitcoin futures open interest at the Chicago Merchantile Exchange (CME) has surged to near all-time highs at 21%, which indicates growing institutional participation in BTC futures.

According to a recent report by Arcane Research, institutional participation in BTC futures has been increasing since the start of the year amid a rise in crypto prices. Furthermore, Bitcoin futures contracts have started trading at a premium to the spot market, the first time this has happened since the fall of FTX.

“The strong start to the year has been backed by growing institutional participation in BTC futures,” Arcane said, adding that CME’s share of the total open interest in BTC futures currently sits at 21%. CME’s market dominance has been higher than this level only in October and December 2021. 

The rise in open interest in BTC futures on the CME exchange comes as cryptocurrencies have started the year with a strong rally. Bitcoin surged to over $23,000 over the weekend, a level not seen in more than four months. The flagship cryptocurrency is up by more than 35% YTD. 

CME is one of the largest derivatives exchanges in the world that offers futures and options trading services in industry segments such as stock market index, currency, real estate, commodities, and cryptocurrencies. Generally, a rise in crypto-related trading volumes on the platform suggests an influx of institutional investors into the digital asset space. 

According to Arcane, CME’s January push comes as investors started to purchase the heavily discounted GBTC and hedge through CME futures after Genesis disclosed that Gemini had sold 30.9 million GBTC shares during its bankruptcy filing. The report said:

“CME’s January push, on the other hand, has been accompanied by strong markets. BTC is up 36% this month. CME futures have started trading at a slight premium to the spot market and have returned into contango. And active participation, defined as non-ETF activity, is behind the recent surge.”

CME Trading Activity Plunged in 2022 Amid Declining Volatility

CME’s crypto-related trading volumes took a hit last year amid declining volatility. In the last month of the year, the cumulative derivatives volume on CME dropped 49.2% to $14.2 billion, its lowest level since October 2020, according to CryptoCompare. Bitcoin futures volume was down 48.3% to $13.2 billion, with Ethereum futures volume dropping 55.3% to $481 million. 

Furthermore, options trading on CME also saw a steep decline, with BTC options trading volume falling 57.4% to $225 million, the lowest figure plunged 41.5% to $2 million, recording the lowest trading volume in its history.

Aside from the slump in derivatives volume, spot trading volumes across centralized crypto exchanges also dropped significantly. The total trading volume on centralized exchanges declined by 46.2% in 2022.