A juicy trade is helping push CME's bitcoin futures to new records, traders say

Bitcoin • August 18, 2020, 11:41AM EDT

Quick Take

CME’s bitcoin futures market hit a record for open interest
On Monday, notional OI hit $948 million
Traders say that’s being fueled by basis trades

CME's bitcoin futures market has been soaring towards $1 billion in notional open-interest, hitting an all-time high of $948 million during Monday's trade.

Launched in 2017, CME's bitcoin futures contract has seen its open interest grow at a fast clip since the end of July. Indeed, the aggregate open interest across the largest bitcoin futures markets has been increasing steadily from around $2 billion in mid-March to nearly $6 billion at last check.

Still, CME is unique given it is the largest derivatives market for U.S.-regulated trading shops and investors. Traders also say unique forces are driven open-interest to record highs.

Joshua Lim, head of derivatives at Genesis Global Trading, told The Block that "the juiciness of the basis" is fueling open interest, referring to a trade that captures the spread between the underlying spot market and CME's bitcoin futures.

"The futures are trading way above spot so people are selling it vs buying spot," said Lim. Genesis, which launched its derivatives desk in June, reported the desk saw $400 million worth of volume in its first month.

A trading executive at another crypto trading firm said that the basis trade was "definitely driving some of it." The person added that the firm has seen a "general uptick in institutional interest around bitcoin."

Most of those firms are expressing their interest in CME futures before spot "based on the familiarity and ease of access."

About Author

Frank Chaparro is the Editor At Large at The Block. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. He runs his own podcast The Scoop and writes a biweekly eponymous newsletter. He leads special projects, including The Block's flagship podcast, The Scoop. Prior to The Block, he held roles at Business Insider, NPR, and Nasdaq. For inquiries or tips, email [email protected].