The CME is the largest futures exchange in the world. Since Bitcoin futures became available, public interest in the new derivative has surged. According to Tim McCourt, Managing Director and Global Head of Equity Products and Alternative Investments at CME, the futures trading volume on their platform has increased steadily on a monthly basis since inception.
In December the average trading volume was 1,600 Bitcoin futures contracts per day. This has increased to 2,500 contracts per day since inception. Approximately 30% of this volume is from countries outside the US, including a large number of contracts out of Asia.
McCourt has stated that he believes the industry should have more regulations, which will encourage mainstream investors to enter the market due to what he believes to be an increase in efficiency and investor confidence.
Bitcoin futures enable institutional investors to speculate on the price of Bitcoin without actually purchasing any crypto. CME Bitcoin futures contracts are equivalent to 5 Bitcoin, where Cboe contracts are equivalent to one Bitcoin. Since the futures became available on both platforms, the price of Bitcoin has fallen substantially, though it is still more than 10 times greater in value than it was at this time last year.
The most remarkable point about CME Bitcoin futures is probably the fact that it has international appeal, particularly in Asia. This may lead to a greater perception of the legitimacy of Bitcoin and other cryptocurrencies around the world. Over time, we will see if this perception translates into a higher volume of Bitcoin purchases, as well as Bitcoin futures.
The addition of Bitcoin futures to CME may also have a positive impact on the stock price of CME Group Inc (CME). According to the Zacks Consensus Estimate, earnings are expected to be raised 6.3% to $6.96 in 2018, and by 2% in 2019 to $7.07. Zacks has recommended that people hold CME Group stock, due to an improving top line and numerous growth initiatives, presumably including Bitcoin futures. According to Zacks, CME Group also has a healthy balance sheet and a cash position that enables them to pay five dividends per year, at a higher rate than the industry average.
According to McCourt, there has been increasing interest from institutional investors looking to get into the market. The company operates contract markets through its subsidiaries, for the trading of futures and options on futures contracts worldwide. These include hedgers who own Bitcoin, speculators who are looking for gains from short-term price swings, and hedge fund and asset managers who want to diversify portfolios to include alternative investments.
Although the growth of Bitcoin futures contracts on CME looks promising, there are some points to consider. CFO John W. Pietrowicz of CME Group Inc. sold 2,500 shares of the stock on April 10th, for a total of $402,550. While this is just 7% of his total shares, it is worth tracking any future transactions. We are not financial advisors and this is only a personal opinion. Although the overall growth of CME and the trading of their stock may not have a direct impact on Bitcoin futures prices, it is possible that such activity may have an indirect impact on total volume and growth of CME Bitcoin futures.