Chicago Mercantile Exchange to dethrone Binance as biggest Bitcoin futures exchange
The Chicago Mercantile Exchange (CME) has improved its ranking, moving up from fourth to second position on the list of the world’s biggest Bitcoin futures exchanges by open interest, Coindesk reported.
This is a notable development because the CME is seen as an institutional demand proxy. In the last quarter of 2020, the CME rose to the top as Bitcoin rallied to almost $40,000. Its most recent jump parallels the developments from exactly one year ago.
CME accounts for $3B of global futures open interest
At present, the CME accounts for almost 17% of the global futures open interest of $17.9 billion, equivalent to $3 billion, data from derivatives research firm Skew show. As the Bitcoin price rallies again, the CME correspondingly climbs in the ranking.
Since the end of September, Bitcoin has grown by almost a third, detaching itself from stock market weakness.
Open interest crash worked in derivatives giant’s favor
In May, the derivatives giant reached second position on the ranking. However, this was not due to institutional participation growth. Rather, it came from a crash in open interest or leverage washout on other exchanges. Their weakness was CME’s strength.
On Wednesday, Binance’s open position value dropped by $1.7 billion. The next biggest loser was OKEx with losses of $1.2 billion. Bybit came in third will open interest value loss of just under $1 billion. In comparison, the CME lost just $30 million.
The annualized basis or premium on its front-month futures reached 15%, a record high in the past six months. This signals buoyant institutional participation.
Binance retains top spot with $4.1B
Despite coming under regulatory scrutiny all over the world this year, Binance is still at the top with open interest value of $4.1 billion. Yet, the CME has taken FTX’s place as the second-biggest exchange and it has every chance of dethroning Binance just as it did at the end of last year.
On the other hand, it’s worth remembering that Binance quickly regained the top spot in the first quarter of 2021.
The role of differences in product specifications
The role of differences in the product specifications must be taken into account. While the CME does not offer Bitcoin margined futures, most analogical exchanges do. These are contracts settled with Bitcoin, not cash. Denis Vinokourov, head of research at Synergia Capital, said:
CME is now the second-largest contributor to the [open interest], which goes to show how negative convexity impacts bitcoin market structure and that the market is generally heading towards stablecoin-margined products.