Bitcoin Futures Trading on CME Hints at Influx of Institutional Money

By Andy Hao


During the month of August, over $5 billion worth of Bitcoin futures contracts have been traded on the Chicago Mercantile Exchange. With each contract representing the right but not the obligation to purchase 5 BTC at a given price, over 100,000 futures contracts were traded on the platform.

The year-to-date numbers are apparently even more impressive. CME managing director Tim McCourt told Forbes contributor Benjamin Pirus that so far this year, Bitcoin futures are averaging more than 7,000 contracts per day on the platform. 

This is meaningful because retail investors don’t have easy access to CME futures trading, so this growth doesn’t represent the participation of the average crypto user. Most futures trading on the CME platform comes from institutional investors and wealthy accredited investors, audiences that Bitcoiners have long been trying to win over. 

It’s widely believed that the 2017 Bitcoin bubble was caused by retail investors, but a far larger pool of capital would be required now to produce a similar price boom. An influx of institutional investors could provide that capital, so for Bitcoin bulls, it’s important to have the interest of those who manage millions or billions of dollars. 

$5 billion is a large sum of money, but it's helpful to give the figure more context. Roughly $1 billion of trading volume happens on the 10 largest spot Bitcoin markets each day, or roughly $30 billion each month. On spot markets like Binance and Coinbase, it’s uncertain how much volume comes from retail versus institutional money, but it’s likely that both platforms skew heavily towards retail investors. 

Much of the daily transaction volume on the bitcoin network can be attributed to retail investing. But the growth of the CME platform, which didn’t even exist two years ago, is a great sign that institutional money is starting to flow towards Bitcoin. The upcoming Bakkt institutional offering of Bitcoin futures contracts may be another catalyst that directs institutional funds into the crypto ecosystem.

That doesn’t necessarily mean that these institutions are all betting on Bitcoin, of course. Futures contracts can be used to bet against Bitcoin, too. Even so, having more institutional money engaged with Bitcoin trading is likely to please some Bitcoin bulls. 

Growing institutional involvement is certainly a positive sign, even if it’s not a guarantee of future success.

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