CME Bitcoin Futures- Why Friday Bitcoin Futures Are Ideal for Economic Data Bets
CME Bitcoin Futures– Chicago Mercantile Exchange’s (CME) bitcoin (BTC) futures, set to expire on Fridays, are becoming increasingly popular among news traders, according to CF Benchmarks CEO Sui Chung. He highlights the advantages of these recently launched contracts, which cater to those looking to capitalize on key U.S. economic data releases.
Features of the New Friday Futures
The CME introduced cash-settled Friday futures on September 30, which are sized at one-fiftieth of one BTC and come with lower margin requirements. These contracts, referred to as the BFF contract, settle every Friday at 4:00 PM New York Time and track the Cf Benchmark’s Bitcoin Reference Rate – New York (BRRNY) variant. A new contract is listed every Thursday at 6:00 PM New York Time, enabling traders to engage with the nearest two Fridays at any given time.
The global derivatives exchange reported a remarkable first-day trading volume of over 31,000 contracts across two different weeks, making it the most successful crypto futures launch in its history.
Unlike monthly contracts, which are influenced by a wide range of events over four weeks, the weekly contracts allow investors to better express views on Bitcoin’s reaction to specific events, such as U.S. macro data releases.
Sui Chung
Advantages for News Traders
Since the market downturn caused by the COVID-19 pandemic in 2020, Bitcoin has increasingly been viewed as a macro asset. Short-term traders often make bets based on notable news announcements and economic data releases, such as U.S. inflation figures and nonfarm payroll statistics.
The Friday futures contracts offer several advantages for news traders, including a low basis or price differential compared to spot prices, reduced rollover costs, and more targeted trading strategies. The shorter duration of these contracts helps limit the gap between futures and spot prices, resulting in a lower premium compared to monthly standard and micro futures contracts. Chung noted that the lower premium reduces the contango bleed, or the cost incurred when shifting positions from one expiry to the next, leading to improved profitability.
Enhancing Market Liquidity
Chung emphasized that the alignment between the Friday futures expiry and the daily net asset value (NAV) calculation of U.S.-listed spot ETFs, which mostly refer to the BRRNY, enhances market liquidity. Increased liquidity facilitates the execution of large orders at stable prices and improves the efficiency of the price discovery mechanism. It’s important to note that retail traders on unregulated offshore exchanges tend to prefer perpetual futures, which utilize a funding rate mechanism to keep prices in line with the spot market. However, these funding fees, collected every eight hours, can be volatile, introducing an element of uncertainty into trading strategies.
FAQs
What are CME Bitcoin futures and when do they expire?
CME Bitcoin futures are contracts that allow traders to speculate on the future price of Bitcoin. The newly introduced Friday futures expire every Friday at 4:00 PM New York Time and settle in cash, making them accessible to retail investors.
What advantages do Friday Bitcoin futures offer to traders?
Friday Bitcoin futures provide several benefits, including lower margin requirements, a lower basis compared to spot prices, and reduced rollover costs. Their shorter duration allows traders to more accurately express their views on Bitcoin’s reaction to specific economic events, such as U.S. macro data releases.
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