Milestone moment in the cryptocurrency market CME Bitcoin futures surpass Binance for the first time

Record-Breaking Milestone CME Bitcoin Futures Surpass Binance in the Cryptocurrency Market for the First Time

The “Wild West era” of cryptocurrencies is coming to an end, and the “Crypto Macro era” closely tied to the global economy has just begun.

Original Author: Blofin Academy

Original Source: Twitter

Translation: Jordan

On the evening of November 9th, Bitcoin made a strong rebound, breaking through the $35,000 resistance level and reaching a high of $38,000, with the total market value of cryptocurrencies surpassing $1.4 trillion.

In comparison, the news of the Chicago Mercantile Exchange’s Bitcoin futures open interest reaching 108,900 BTC (approximately $4.02 billion) and surpassing Binance didn’t seem to attract much attention. However, for the cryptocurrency industry, this is definitely a significant milestone.

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(Image from: Coinglass)

In the early stages of cryptocurrency development, the connection between Bitcoin and the global macroeconomy was not very tight. But over time, as the largest decentralized network in the world, Bitcoin has become increasingly widespread in its applications, and its price trends have gradually aligned with the global economy. The chart below shows the year-on-year growth rate of Bitcoin and global M2 money supply from 2014 to 2023:

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In fact, Bitcoin combines many advantages of gold and foreign exchange, such as:

1. BTC, as a liquidity network covering the world, makes liquidity transfers relatively easier;

2. The price movement of BTC reflects changes in global liquidity levels in a timely manner;

3. BTC can serve as a short-term safe haven, providing temporary “liquidity channels” and acting as a “safe harbor” for risk capital;

4. BTC trading is more decentralized compared to foreign exchange trading and is less likely to be affected by regulation and central bank policies.

On the other hand, starting from the fourth quarter of 2022, the correlation between Bitcoin and gold, Nasdaq, and the US dollar has gradually decreased (as shown in the chart below). To some extent, this means that Bitcoin is more conducive to diversifying the overall risk of investment portfolios and reducing volatility.

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It is for these reasons that institutional investment exposure to Bitcoin has been steadily increasing since 2021. According to statistics disclosed by financial index analysis company VettaFi, as of November 2023, the ProShares Bitcoin Strategy ETF (BITO) has become the most actively traded cryptocurrency ETF, with average trading volumes significantly higher than gold ETFs.

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In addition, from the perspective of open interest (OI) and trading volume of futures contracts, the demand for BTC exposure from institutional traders is also increasing. Since January 2018, the open interest of Bitcoin futures on the CME has increased by over 100,000 standard contracts (Note: each standard contract represents 1 BTC).

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Furthermore, the daily trading volume of CME cryptocurrency futures has become comparable to many mainstream futures products, as shown in the table below:

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Surpassing Binance indicates that CME now has the largest share of the BTC Delta 1 market, and also signifies a closer connection between the cryptocurrency market and other markets. Once spot ETFs are approved as planned, it is bound to attract more traditional institutions to expand their cryptocurrency investment exposure, and CME’s position in the global cryptocurrency market will further rise.

Of course, traditional institutions may prefer to look at the cryptocurrency market from a global macro perspective, and the participation of institutions will bring the global macro narrative into the cryptocurrency market. This is very different from the perspective of cryptocurrency “natives”. Therefore, for investors, if they continue to analyze the cryptocurrency market using old frameworks, it may no longer be effective, and they must introduce new analytical frameworks that are cross-asset and cross-market.

In conclusion, the “wild west era” of cryptocurrency is about to end, and the “cryptocurrency macro era” that is becoming increasingly connected to the global economy is just beginning.