CME Bitcoin futures volume surpasses Bybit: What does it mean for BTC price?

The Chicago Mercantile Exchange (CME) is one of the world’s leading derivatives markets, offering futures and options contracts on various assets, including Bitcoin (BTC). Recently, CME’s Bitcoin futures volume surpassed that of Bybit, a popular crypto exchange that also offers perpetual contracts. Does this indicate a shift in the Bitcoin market dynamics, and how does it affect the BTC price?

CME vs Bybit: A tale of two markets

CME launched its Bitcoin futures product in December 2017, around the same time that BTC reached its then all-time high of $19,800. Since then, CME has become a major player in the Bitcoin derivatives market, attracting institutional and professional traders who want to hedge their risks or speculate on the price movements of BTC.

CME Bitcoin futures volume surpasses Bybit: What does it mean for BTC price?
CME Bitcoin futures volume surpasses Bybit: What does it mean for BTC price?

Bybit, on the other hand, is a crypto-native platform that offers perpetual contracts, which are similar to futures but have no expiry date. Perpetual contracts are more popular among retail and individual traders who want to trade with high leverage and benefit from the funding rate mechanism, which rewards traders who take the opposite side of the market sentiment.

According to data from Coinglass, CME’s Bitcoin futures open interest (the total value of outstanding contracts) reached $2.24 billion on Aug. 17, surpassing Bybit’s $2.16 billion. This made CME the second-largest Bitcoin futures market, behind only Binance.

Why did CME overtake Bybit?

One possible reason for CME’s rise in Bitcoin futures volume is the recent market correction that occurred between Aug. 16 and Aug. 17, when BTC price dropped by 12.8%, from $47,500 to $41,400. This led to a massive liquidation of overleveraged positions on crypto exchanges, resulting in a $2.4 billion reduction in the aggregate futures open interest.

However, CME was relatively unaffected by this event, as its contracts are cash-settled and do not involve actual delivery of BTC. Moreover, CME’s contracts are subject to stricter regulations and margin requirements, which prevent excessive leverage and risk-taking.

Another possible reason for CME’s dominance is the growing demand for regulated and compliant Bitcoin products from institutional investors, who prefer to trade on platforms that offer more security and transparency. CME’s Bitcoin futures market may also address some of the concerns that the U.S. Securities and Exchange Commission (SEC) has expressed regarding the approval of a Bitcoin exchange-traded fund (ETF), such as market manipulation and liquidity issues.

How does CME’s volume affect BTC price?

The impact of CME’s Bitcoin futures volume on BTC price is not straightforward, as there are many factors that influence the price discovery and sentiment of the market. However, some analysts have suggested that CME’s volume may have a positive effect on BTC price in the long term, as it indicates a higher level of institutional adoption and interest in Bitcoin.

For instance, Marcel Pechman, a market analyst at Cointelegraph, wrote:

“On a larger time horizon, the CME’s Bitcoin futures trading products affect Bitcoin’s spot price more significantly […] The CME products allow for increased price stability and decreased risk. This is bullish for Bitcoin since it allows larger investors to get involved in the market with less hesitation.”

On the other hand, some traders have observed that CME’s Bitcoin futures often create gaps in the price chart, as CME does not operate on weekends or holidays, unlike crypto exchanges. These gaps tend to get filled sooner or later, creating arbitrage opportunities and influencing the short-term price movements of BTC.

For example, Dexter Ng, a trader and co-founder of Xrpgenius.com, told Cointelegraph:

“CME gaps do affect BTC price because there are traders who specifically trade these gaps […] When there is a gap down or up on Monday open from Friday close on CME chart, there will be traders who will try to fill these gaps by longing or shorting BTC spot or perpetual swaps.”

However, not everyone agrees that CME gaps have a significant effect on BTC price. Melvis Langyintuo, a client solutions strategist at OKCoin, told Cointelegraph:

“CME Bitcoin gap fills are unlikely due to the CME’s lack of Bitcoin futures trading volume in comparison to crypto-native derivatives exchanges […] The gap phenomenon is likely driven by technical analysis as opposed to any fundamental factors stemming from trading activity on either venue.”

CME’s Bitcoin futures volume surpassing Bybit’s is an interesting development that reflects the diversity and complexity of the Bitcoin market. While it may not have a direct or immediate impact on BTC price, it may indicate a shift in the market structure and sentiment that could have long-term implications for Bitcoin’s adoption and valuation.

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