Crypto News: Levering up mom and pop

David Pan takes a look at a new futures offering from CME that will allow retail traders to lever up their Bitcoin bets.

As traditional financial firms in the US take full advantage of the revival of crypto after the landmark launch of Bitcoin exchange-traded funds, retail investors are vying for more access to derivatives trading that juices up bets in the volatile market.

Institutional investors in the US enjoy a myriad of platforms to trade crypto derivatives such as options and futures contracts. They can tap into over-the-counter options trading desks in which participants make bilateral agreements, or futures contracts that require a large amount of collateral. Granted, there are futures-based ETFs, but those vehicles may not be the most cost-effective tools for small traders.

That is in part what has prompted CME Group Inc. to launch a smaller Bitcoin futures contract. Dubbed Bitcoin Friday futures, these weekly contracts are priced at one-50th the size of one Bitcoin, meaning investors don't need as much capital as they do when buying current offerings. The cash-settled product is set to become available on Sept. 30.

Source: @CMEGroup

Essentially, what that means is a small investor will be able to post around $300 in margin to get the full exposure of one BFF contract worth $1,200. The contract will list every Thursday night (New York time) for a Friday trade date. CME said that expiry is supposed to enable investors to track Bitcoin spot prices more closely.

It is one step further down the road for major US regulated institutions when it comes to making crypto derivatives more accessible to the retail investors in the country, even if the offering pales in comparison to some of the products available offshore.

Perpetual futures contracts on Binance, which can be settled more frequently without an expiry, are among the most-traded products used to lever up bets among so-called "degen" retail traders across the globe, while Deribit has the lion's share of the crypto-options market.

Still, CME's move signals that the range of opportunities for US retail crypto traders is expanding again after a series of meltdowns in past years. Of course, given what can go wrong with using leverage, the risks are expanding also.

$751 Million

The total amount of legal fees a group of 22 major law firms earned by working on seven Chapter 11 bankruptcies stemming from the crypto fallout that began in 2022, according to Bloomberg Law.

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