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26 October 2020

Closing the gap: The effect of CME Bitcoin futures on Bitcoin price

Closing the gap: The effect of CME Bitcoin futures on Bitcoin price


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The price of one actual Bitcoin on the open crypto market, known as spot BTC, fluctuates based on a countless number of factors, such as trading volume, usage and adoption.

Cash-settled Bitcoin futures trading products from the Chicago Mercantile Exchange stand as one arguable highly referenced indirect element contributing to Bitcoin’s (BTC) price direction. 8

At the height of Bitcoin’s largest bull run to date, the CME launched cash-settled Bitcoin futures trading, on Dec.

Buying one CME Bitcoin futures contract (equivalent to the price of five Bitcoin) when BTC’s price is at $10,000 and holding through expiration at the end of the month means the trader will receive $55,000 in cash at the end of the month, not actual Bitcoin.

Since trades involve no actual Bitcoin sales or purchases, these futures products logically may not seem like they should impact Bitcoin’s spot price.

On a larger time horizon, the CME’s Bitcoin futures trading products affect Bitcoin’s spot price more significantly, Dexter explained, adding: “The CME products allow for increased price stability and decreased risk.

Some commodity futures are physically settled, however, involving the transfer of the underlying asset after expiration, thus, differing from CME’s Bitcoin futures trading products.

A gap occurs on the CME Bitcoin futures chart when Bitcoin’s spot price moves while the CME Bitcoin futures markets are closed for the weekend or the holidays.

If CME’s Bitcoin futures open for trading after a big move from Bitcoin, a gap is left on the chart between the listed price when the CME closed and the price of BTC when it opens.

A conclusion can be difficult when it comes to how much impact any specific driver has, although in this case, it seems as though the CME’s Bitcoin futures may affect Bitcoin’s spot price on a number of levels.

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