- According to an executive speaking at a conference in London, CME Group wither (LEFT) and cardano (ADA) is in the research phase of offering futures contracts.
A CME Group executive said earlier this week that the company may soon offer Solana (SOL) and Cardano (ADA) futures contracts on the Chicago Mercantile Exchange.
Payal Shah, director of equity and cryptocurrency products at CME, spoke at CryptoCompare’s Digital Asset Summit in London. Asked if CME would consider offering futures and other derivatives for altcoins, the executive commented:
“We are investigating this. Regarding crypto assets other than the first two cryptos; Solana, Cardano, we are getting a lot of customer requests.”
Although they are still classified as “altcoins” because they are not Bitcoin or Ether (the latter sometimes referred to as an altcoin), SOL and ADA have solidified their positions in the top ten crypto assets by market cap over the past years.
At the time of writing, SOL ranks as the sixth largest cryptocurrency with a market capitalization of $45.5 billion, while ADA ranks 9th on the list of top cryptocurrencies with a market capitalization of $37.7 billion.
Solana in particular has experienced significant growth. Altcoin, one of the best performing cryptocurrencies in 2021, was at $1.84 at the beginning of the year and rose to $178.26 on December 15 towards the end of the year.
There are 2 main challenges to consider before offering SOL and ADA products
While the interest in these assets is certainly huge, Shah said the CME must contend with two main challenges before offering futures contracts for SOL or ADA.
First, CME’s current bitcoin and ether futures are based on indices for price based on price feeds from five different exchanges. If someone gets cut, they still have a fixed price and they can adjust their future. According to Shah, the launch of these proposals will depend on the index issue being resolved:
“In terms of bitcoin and other currencies other than ether, we need an index or the ability to create an index first.”
Regulations are another concern of the company, according to the executive. Speaking on regulation, Shah noted the current lack of regulatory clarity for altcoins in the United States. “We need to know where to send the paperwork,” Shah said, referring to the lack of clarity on which U.S. regulatory agency would have jurisdiction over altcoin-related instruments.
The interest in CME’s crypto products is huge
There is a lot of interest in the Bitcoin and Ethereum products that CME already provides. In fact, just last week, the commodity exchange started offering options for micro Bitcoin and micro Ether futures.
Crypto derivatives products such as Bitcoin futures allow investors to speculate on the price of an asset without the need to physically hold the underlying asset. They are used by traders to bet on price action and hedge against the volatility of the asset.
“We’re off to a really good start. The screens are amazing. We’ve had some really good trades, If we need to open this up a bit, we launched the micro Bitcoin futures contract in May of last year and we’ve already made close to 5 million contracts.”
The first Bitcoin futures contract launched by the group has also grown significantly.
“Since we launched our first futures contract, the standard Bitcoin future with a five-fold multiplier, we have seen it grow from 1,000 contracts per day to now 10,000 contracts per day in a few years – in a little over four years. This is mind-blowing growth.”
“In the few years since we launched our first futures contract, our standard Bitcoin futures contract with a five-fold multiplier, we’ve seen that grow from 1,000 contracts per day to 10,000 per day. This is mind-blowing growth.”
Besides the CME, crypto-native exchanges are also watching the crypto derivatives market closely. Crypto.com, FTX, and Coinbase made moves last year to appeal to derivatives traders.
Finally, in April 2021, CME was forced to dismiss rumors that it had launched a Dogecoin futures contract after reports began circulating on Twitter.