The BlackRock Bitcoin ETF news could become a huge deal for Bitcoin futures as an asset class, and CME in particular as the only regulated exchange to execute cash-settled trades. A thread:
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For a futures market to be more than just market makers trading with each other, there needs to be a commercial need to offload price risk using futures that companies are willing to pay for. Think Chevron/Exxon with oil futures, or banks with interest rate futures.
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Right now Bitcoin doesn’t have a big commercial contingent that are active in the futures markets. If BlackRock were to enter, that dynamic would change pretty quickly & drastically.
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An example of ETF flows driving futures volume can be seen with CBOE and VIX ETPs. Funds like VXX give owners exposure to rolling CBOE VIX futures positions. More VXX AUM directly translates to more VIX futures activity:pic.twitter.com/UPQt2xvyII
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When more AUM flows into VIX ETP products, we see CBOE VIX volumes & profitability rise - management likes to point out when this trend is happening like in Q4 2017:pic.twitter.com/dFxGVdqdpM
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If Bitcoin ETF activity starts to spring up, CME would see funds enter the futures markets consistently & with strict mandates to trade their product. A long term, profitable market needs dynamics like this to succeed. Im optimistic about Bitcoin's ETF impact on CME - I'm long
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