On Tuesday (March 30), the world’s leading derivatives marketplace CME Group announced that it plans to launch a new Bitcoin futures product on May 3 (subject to regulatory approval, of course).

According to CME’s press release, Micro Bitcoin futures will be 1/10 the size of one bitcoin (BTC). This smaller-sized contract will “provide market participants – from institutions to sophisticated, active, individual traders – with one more tool to hedge their spot bitcoin price risk or execute bitcoin trading strategies in an efficient, cost-effective way, all while retaining the features and benefits of CME Group’s standard Bitcoin futures.”

Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, had this to say:

Since the launch of our Bitcoin futures contract in 2017, we have seen steady, ongoing growth of liquidity and market participation in our crypto derivatives, especially among institutional traders. The introduction of Micro Bitcoin futures responds directly to demand for smaller-sized contracts from a broad array of clients and will offer even more choice and precision in how participants can trade regulated Bitcoin futures in a transparent and efficient manner at CME Group.

The new futures contract will be “cash-settled, based on the CME CF Bitcoin Reference Rate, which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin.”

Here is CME explaining the motivation behind the launch of this product:

Since the launch of the Bitcoin futures (BTC) contract in December 2017, its notional value has increased dramatically. As a reference, see a chart of the BTC settlement prices since launch.

The BTC notional value has increased from $19K on the date that it launched to nearly $58K on March 11, 2021. The amount of capital needed to access the futures market has significantly increased. To make our market more accessible to risk managers and other traders, CME will launch the Micro Bitcoin futures contract, which is 1/50 the size of the Bitcoin futures contract (i.e. 1/10 of one bitcoin versus five bitcoin for Bitcoin futures (BTC).

CME says these are the main benefits of this new product:

  • Get the same benefits as the larger contract at 1/50 of the contract size, settled to the regulated CME CF Bitcoin Reference Rate (BRR).
  • Trade on a regulated exchange and enjoy the price discovery of transparent futures, where all participants see same prices and quotes.
  • Add more granularity to your trading and risk-management strategies by using Micro Bitcoin futures to fine-tune your exposure.
  • Save on potential margin offsets with Bitcoin futures and options, and Ether futures, plus add the efficiency of futures contracts.

Micro Bitcoin futures (MBT) will be available to trade from 18:00 ET on 2 May 2021 for trade date 3 May 2021.

Finally, here are the contract specifications:

Source: CME Group

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The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.