Topic. 10: Cryptocurrencies derivatives

Cryptocurrency has been an attractive speculative asset for a long time on over-the-counter platforms or so-called crypto exchanges.

In the last ten years, exchanges have also begun to actively use these instruments.

In addition, the growth of speculators' interest in cryptocurrencies has contributed to a dynamic increase in their price.

Exchange trading in cryptocurrency derivatives spread to international and domestic exchanges more than 10 years ago.

For their exchange trading, exchanges have selected two main types of cryptocurrencies:

- Bitcoin;

- Ethereum.

The Chicago Mercantile Exchange was one of the first to introduce trading in cryptocurrency futures and options. It currently offers a wide range of instruments:

- standard contracts for Bitcoin and Ether;

- mini-contracts for Bitcoin and Ether;

- micro-contracts for Bitcoin and Ether.

Exchange traders take analytical information on spot prices for cryptocurrency from CF Benchmarks.

Bitcoin and Ether are the two largest cryptocurrencies by market capitalization, and they are highly correlated with each other. Since the relative strength of the correlation is constantly fluctuating, market features can affect one cryptocurrency more than the other, creating trading opportunities for speculators.

Thanks to the exchange-traded futures on the existing index of the ratio of one cryptocurrency to another - Ether/Bitcoin (EBR), exchange market participants can now effectively execute relative value transactions between ether (ETH) futures contracts and bitcoin (BTC) futures contracts in a single transaction. This new contract allows investors to access cryptocurrency without having to review different analytical reports for different cryptocurrencies.

It is important to note that the high value of 1 Bitcoin has led to the introduction of mini and micro contracts on exchanges. At the same time, this trend is observed on both American and European exchanges.

To increase the popularity of new innovative crypto derivatives, the Chicago Mercantile Exchange provides its exchange traders with systematic analytical reports.

The latest analytical report of the Chicago Mercantile Exchange indicates increased interest from large investors in cryptocurrency derivatives. Institutional interest in Bitcoin and Ether remains high, as evidenced by the record number of owners of large open or buy positions, which was recorded throughout 2024. CME Group’s cryptocurrency futures averaged a record 480 institutional investors in the second quarter of 2024, up 9% from the previous record quarterly average in the first quarter of 2024. In addition, futures and options value averaged a record $13.7 billion in the second quarter of 2024.