CME Bitcoin Futures See Record Volumes, Crucial Signal For Rising Institutional Demand

This week saw the highest ever volume for Bitcoin futures on the Chicago Mercantile Exchange as volume exceeded 18,000. The big signal is that institutional investors are paying attention as futures contracts get snapped up at an ever-increasing rate.
Record BTC Contract Volumes on CME
According to stats from the CME there were 18,338 on Wednesday, the highest figure ever recorded. This is equivalent to 91,690 Bitcoins or roughly $365 million at today’s prices.
Source: CME
Futures contracts enable speculators to bet on the prices rather than purchasing the physical assets themselves so these figures may be a little misleading. What they do indicate however is that there is a lot more interest in crypto futures now than ever before.
When new products that offer physically settled contracts hit the market, they will be paying out in BTC which will drive massive momentum for crypto markets. Over the past year or so the anticipation of a crypto exchange traded fund (ETF) being launched has dominated the news. 2018 has been the year of regulation and cooling off which was only to be expected after the previous year of rampant FOMO and parabolic market action.
This year will be different and many industry experts predict the launch of at least one institutional investment vehicle. Bakkt is the primary candidate but it has been in a holding pattern with a few others while US regulators finally wake up from their month-long imposed vacation.
According to The Block European exchange giant, Eurex, is gearing up to launch crypto futures so the list of institutional offerings is growing rapidly. The derivatives exchange operated by Germany’s Deutsche Börse will be offering Bitcoin, Ethereum and XRP imminently according to the report.
Exchange Traded Funds are The Future
In addition to these future products, there is already one type of ETF that is actually traded through an ETN (exchange traded note) which allows investors to get direct exposure to Bitcoin prices. The Grayscale Bitcoin Trust (GBTC) bypasses the technicalities of buying and storing Bitcoin but still allows investors to get in on the action by buying shares that trade at around a thousandth of the price of BTC, so a few dollars instead of thousands.
GBTC has been wildly popular with over $800 million already invested in the Bitcoin fund:

2/21/19 UPDATE: Holdings per share and net assets under management for our investment products
Total AUM: $872.1 million$BTC $BCH $ETH $ETC $ZEN $LTC $XLM $XRP $ZEC pic.twitter.com/tzQxkd7ilX
— Grayscale (@GrayscaleInvest) February 21, 2019

In addition to BTC are 8 other crypto assets but clearly, Bitcoin is the most popular. The fund eliminates the volatility of buying and owning Bitcoin directly which is something that institutions want, slow and steady wins the race. The outlook for 2019 is currently taking shape and the institutions are already involved. Buckle up and get ready for the ride!
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Intercontinental Exchange (ICE) Chief Confident About Future for Bakkt and Crypto 

The ongoing regulatory delays and hurdles imposed by the US government have not dampened the enthusiasm for crypto related products such as the highly anticipated Bakkt launch.
Bakkt Will be a ‘Moonshot Bet’
The Intercontinental Exchange (ICE) has recently announced its fourth quarter earnings which have beat some Wall Street predictions. Chief executive Jeffrey Sprecher took the opportunity to speak on the sterling performance and shed some light on the Bakkt crypto project. Seeking Alpha ran a full transcript of the conference call in which Sprecher referred to Bakkt as a “moonshot bet”.
Over a billion dollars has been spent on strategic investments in 2018, including the Bakkt crypto futures project, according to CFO Scott Hill. Sprecher added that Bakkt had raised over $180 million from ICE and twelve other investors and partners including Fortress Investment Group and Susquehanna International Group. He said that “as we look to 2019 and beyond we’re excited about the opportunities that lie ahead, not only for our core business but also for newer initiatives,” which includes Bakkt.
The launch delays have been largely the fault of the US government shutdown imposed by president Trump. The highly anticipated product has been seen as a major on-ramp for crypto as it includes some major players. The firm aims to create a crypto ecosystem to bring huge companies such as Starbucks and Microsoft into the crypto industry. Sprecher stated;
“That infrastructure has attracted a lot of very, very interesting companies that have come — some that have invested in Bakkt, some are just working with Bakkt to try to tap into that infrastructure for some new use cases that will involve blockchain and digital assets and other things that we can provide these people. Obviously, we’ve announced the Starbucks — our work with Starbucks and Microsoft. We have very, very large retail franchises global connectivity to end users that we hope will be brought into that ecosystem and could create a very, very valuable company out of that initiative if our business plan plays out.”
Regarding the Bakkt launch date there were no specifics mentioned, only that it is expected ‘later this year’. Last month the company revealed more details about its Bitcoin futures products. The Bakkt BTC (USD) Daily Future will be a 1 BTC contract that will be physically delivered.
Bakkt also announced the acquisition of assets from Rosenthal Collins Group (RCG) last month. The ‘back office’ infrastructure will be needed to develop the crypto ecosystem and ensure full security and a trusted fintech solution for its clients.
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Ethereum Consensus Shift Could Delay Any Derivatives Products

The biggest thing on the launch pad this year is the Bakkt crypto exchange which is currently in a holding pattern while US government employees twiddle their thumbs during Trump’s shutdown. Several other contenders are hopeful about Ethereum futures but according to one crypto exchange boss they are unlikely to be seen soon.
Regulatory Concerns Mounting
According to Paul Chou, chief executive officer of LedgerX, odds of an Ethereum derivative product launching in 2019 are 50-50 at best. The company is one of several which already have Ethereum options ready to trade. But just like Bakkt it is currently in the queue waiting for the CFTC to wake up from the prolonged government shutdown.
According to The Block regulators still don’t really understand Ethereum and are waiting for a ‘request for input’ which solicits information from market participants; “The RFI seeks to understand similarities and distinctions between certain virtual currencies, including here ether and bitcoin, as well as ether-specific opportunities, challenges, and risks,”
In addition to LedgerX are ErisX and Seed CX which also have Ethereum based derivatives on offer. CBoE Global Markets, which was one of the first to get Bitcoin futures off the ground in late 2017, also has an Ethereum product but is doubtful that regulatory approval will come soon.
Former fintech adviser to the CFTC, Jeff Bandman, said “They understand what a proof of work network is like because that’s how bitcoin works, but proof of stake raises new questions. Specifically, what are the risks?” He added that once the agency has gained more knowledge on the product it could start to deliberate in the first half of 2019 … providing the government shutdown comes to an end.
The Casper update will usher in proof of stake for Ethereum and change the landscape entirely, at least in the eyes of the CFTC. The delayed Constantinople update which was due yesterday is a preliminary step for a shift from PoW to PoS for the network. Crypto attorney Nelson Rosario told The Block;
“There is a lot of uncertainty, regulators see this and they think ‘what exactly are we giving you permission to sell a futures product on’,” with one industry insider adding “Staking mimics a derivative product. If you are holding ether as a stake than you are essentially betting it will go up and if you are not you are effectively betting it will go down, at worst, or at best you don’t want it sitting on the network. If you have a future on top of that then you are adding a level of complexity that developers have not worked through,”
The shift in consensus for Ethereum has been heralded as the biggest progression for the network but from a regulatory perspective it could be another big headache.
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Royal Mint Gold Idea Shelved Over Exchange Issues and Government Veto

The U.K.’s Royal Mint plans to create a digital token backed by physical gold has been shelved after U.S.-based derivatives exchange, the CME, dissolved a partnership between the two entities and the government stepped in to block proposed trading on a cryptocurrency exchange.
Meanwhile, other mints and startups around the world push on with their efforts to provide gold-backed digital assets.
Is the UK Government Still Wary of Cryptocurrency?
According to reports in Reuters, three unnamed sources have spoken about the shelving of the Royal Mint Gold idea. They told the publication that the scheme had received several setbacks – the latest being a government veto over plans to trade the RMG tokens on an unnamed, purely cryptocurrency exchange platform.
This would have been the first time a developed economy’s government had allowed one of its entities to be involved with a digital asset exchange platform. However, the U.K. government’s wariness over the space has shown through and the plans have now been shelved.
The idea was first proposed in 2016. Originally, the RMG tokens were to be traded on a CME-owned, blockchain-based trading platform. This would allow investors to trade the gold held in the Royal Mint’s vaults in a much more efficient way than previously possible.
CME pulled out of the scheme in 2017 after a series of staffing changes. The sources quoted in Reuters claim that this showed that the derivatives specialist’s enthusiasm for crypto was also waning:
“CME’s management changed, and they walked away, didn’t want to get involved.”
However, this is something that the CME Group refute. When asked for comment, a representative stated:
“It is not correct to say we have ‘de-emphasised’ digitisation and remain committed to pursuing our digitisation strategy.”
After the CME Group left the project, the Royal Mint desperately needed to find another trading venue to launch the RMG token on. However, plans to trade it on a strictly crypto exchange were quickly vetoed by the government. This in turn prompted the CEO of the Mint to shut the project down earlier this year.
Whilst the reputability of the digital asset exchange in question is unknown, it is hardly surprising that the U.K. government was not keen on the idea of an entity entirely owned by itself launching on an exchange platform that is not regulated by any government, let alone the U.K. one.
In terms of what it means for the wider crypto space, such a veto seems largely insignificant. It would be incredibly foolish for the U.K. government to allow the Royal Mint to launch its token on an exchange that operates entirely outside of existing legal frameworks. Perhaps once a clear set of regulations exist, such an initiative will get the green light from the government.
Unfortunately, such a delay will likely mean that the U.K. will lose any first mover advantage they might have enjoyed if they had managed to launch their token when they had planned. Already the Perth Mint in Australia and the Royal Canadian Mint have launched their own versions of the RMG token. It is unclear how successful either of these have been in terms of investor interest, however.
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Coinbase is Reportedly Exploring a Bitcoin ETF, Taps BlackRock for Expertise

San Francisco-based cryptocurrency exchange Coinbase is reportedly considering adding a Bitcoin exchange-traded fund (ETF) to its arsenal, and has been in talks with the world’s largest global investment management firm, BlackRock Inc.
Coinbase Aims to Launch a Crypto Exchange-Traded Fund
Bitcoin ETFs are a hot button issue at the moment throughout the cryptocurrency community.
All eyes are on the U.S. Securities and Exchange Commission (SEC), waiting to see if the chief U.S. securities regulator will approve or deny Bitcoin ETF proposals from a handful of investment firms. Coinbase seemingly doesn’t want to miss out on the buzz, or let their competitors get an edge, and are reportedly ready to explore a Bitcoin ETF of their own.
Coinbase currently offers a variety of products and services to both retail and institutional investors, including a cryptocurrency trading platform, an ERC-20 token wallet, and most recently, a custody product for institutional investor assets. Next on Coinbase’s list, is a crypto-based ETF, according to a sources cited by Business Insider.
Coinbase Seeks BlackRock’s Industry Expertise
According to the report, Coinbase held a number of conversations with executives from BlackRock’s blockchain division, hoping to gain valuable industry insight and expertise from a firm that’s deeply engrained in the ETF space, offering a number of ETFs through its iShares subsidiary.
Business Insider’s source claims that BlackRock didn’t give Coinbase any “concrete recommendations” and it is unclear if the two firms will together pursue a cryptocurrency ETF.
BlackRock has been exploring blockchain since 2015, seeking ways to implement the emerging technology across its financial services and products.
The cryptocurrency market, however, isn’t a space that BlackRock is interested in pursuing according to recent comments by BlackRock chairman and CEO Larry Fink. He told Erik Schatzker on Bloomberg Surveillance that BlackRock clients aren’t looking to buy cryptocurrencies. Fink later called Bitcoin an “index of money laundering.”
Another Contender Enters the Bitcoin ETF Arena
Coinbase would join Winklevoss-owned, U.S.-based cryptocurrency exchange rival Gemini and others in trying to get a Bitcoin ETF approved by the SEC.
Last month, the SEC rejected a Bitcoin ETF proposed by the Winklevoss twins, Cameron and Tyler Winklevoss. The SEC has also initially rejected a number of Bitcoin ETF proposals made by ProShares, GraniteShares, and Direxion, but later announced that it would be reviewing the disapproval orders.
The fate of yet another Bitcoin-related ETF from VanEck and SolidX is expected to be decided on or before September 30. The SEC was initially supposed to approve or deny the proposal in early August, but the decision deadline was delayed until the end of September.
Uncertainty around these Bitcoin ETF proposals has created a lot of volatility in the cryptocurrency market. Bitcoin recently peaked at a local high of $7,400, only to drop to $6,400 nearly 24 hours later. If a Bitcoin ETF is indeed approved, many experts are expecting a “nice rally.”
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