The second quarter saw a marked increase in institutional involvement in the regulated bitcoin (BTC) and ether (ETH) futures on the Chicago Mercantile Exchange (CME), a leading participant in the derivatives market. In Q2, the average number of significant open interest holders—entities with at least 25 bitcoin futures contracts—reached an all-time high of 107, according to a recent message to CoinDesk. The average number of major open interest holders for ether throughout that time was 62.
The increase in institutional interest was ascribed by CME to investors’ increased desire to manage risk and exposure in the cryptocurrency area as well as hedge against the escalating market volatility. Investors sought regulated venues and products to successfully navigate the volatile bitcoin market because the Commodity Futures Trading Commission (CFTC) was in charge of the CME futures.
Institutions looking for exposure to cryptocurrencies without direct ownership have long preferred the normal bitcoin futures contract, which is worth 5 BTC, and the micro contract, which is worth one-tenth of 1 BTC. Additionally, due to their cash-settled nature, the normal ether futures, with a contract amount of 50 ETH, and the micro futures, equivalent to one-tenth of 1 ETH, garnered institutional interest.
During the first half of the year, major cryptocurrencies continued to rise, and this increasing institutional engagement occurred at the same time. From April to June, Bitcoin increased by 7%, adding to an already astounding 84% increase in the first half of the year. Ether also had a 61% rise throughout that time.
Notably, in the first half of the year, trading volumes and open interest for BTC and ETH futures and options reached record highs due to the need for hedging instruments, which also drove the growth. Trading volume shows how many contracts were traded on a particular day, while open interest shows how many contracts were active at any one moment. An rise in open interest signals more money entering the market.
Open interest in standard bitcoin futures contracts, in instance, averaged a record 14,800 contracts in the first half of the year, a 15% rise over the prior year. At the same time, open interest in bitcoin options averaged an unheard-of 9,400 contracts, representing a remarkable 175% increase from 2022.
Significant parties are becoming more interested in navigating the cryptocurrency market inside a regulated framework, as seen by the increase in institutional involvement in CME’s regulated futures for bitcoin and ether. The strong performance of these futures contracts may have wider ramifications for institutional engagement and the development of the cryptocurrency market as a whole as the crypto environment continues to change.
