According to CF Benchmarks, the new Bitcoin Friday futures of CME offer news traders a more flexible weekly option, with reduced margins and high liquidity. These contracts have quickly established themselves as the most successful launch of CME.
Let’s see all the details below.
CF Benchmarks: the advantages of CME Bitcoin friday contracts for greater liquidity
The Chicago Mercantile Exchange (CME) has recently introduced a new range of Bitcoin futures, called “Bitcoin Friday Futures,” designed to expire every Friday.
This new offer, launched on September 30, was met with enthusiasm by traders and investors, recording over 31,000 contracts traded on the first day.
This performance has made the launch the most successful in the history of CME cryptocurrency futures. But what makes these contracts so special, and why are they considered ideal for news traders and retail investors?
According to the CEO of CF Benchmarks, Sui Chung, the Bitcoin Friday futures are particularly suited for news traders who wish to capitalize on major US economic revelations, such as inflation data or non-farm payroll reports.
Unlike traditional monthly contracts, weekly futures offer investors a more precise opportunity to bet on the immediate market reactions to these economic events.
Bitcoin has become an increasingly popular macro asset after the market crash of 2020, when the coronavirus outbreak shook global financial markets.
Since then, speculative traders have started using Bitcoin as a means to react quickly to crucial economic data, such as monthly inflation and wage figures.
The weekly futures, which expire every Friday, allow traders to capitalize on this information, offering them a narrower and more targeted time window to bet on the fluctuations of the Bitcoin price.
One of the main benefits of Bitcoin Friday futures compared to traditional monthly contracts is the lower price difference between the future value and the spot value.
This reduction of the “contango,” which is the differential between the price of the future and the current price of the underlying asset, results in lower rollover costs for traders.
Advantages of weekly futures
What explained above means that traders can move their positions from one expiration to another with less cost compared to monthly or extended duration contracts.
Furthermore, the smaller differential between weekly futures prices and spot prices reduces the complexity of the analysis, making these contracts more attractive for retail traders.
Chung explained the following:
“The reduced time horizon of weekly contracts translates into a lower base compared to their monthly counterparts, facilitating the understanding and execution of trading strategies for less experienced investors.”
Another positive aspect of Friday’s futures is the alignment between the expiration of these contracts and the calculation of the daily net asset value (NAV) of the spot ETF listed in the United States.
We remind you that the majority of these are based on the Bitcoin Reference Rate – New York (BRRNY) by CF Benchmarks.
This alignment improves liquidity, as a greater market participation makes it easier to execute large orders at stable prices.
The CME designed these contracts with the intent of making them more accessible to retail investors. The Bitcoin Friday futures have lower margin requirements compared to standard monthly contracts and are cash-settled.
This means that investors do not have to own the underlying asset, in this case Bitcoin, to be able to trade.
The contract has a size equivalent to a single Bitcoin, but with the possibility of participating without having to commit the entire capital necessary to purchase the digital token.
A new contract is listed every Thursday at 6:00 PM New York time, offering traders the opportunity to trade the two nearest Fridays at any time.
This allows unprecedented flexibility in planning weekly trading strategies. Consequently offering traders the ability to react quickly to economic events that unfold during the week.
A comparison with perpetual futures
Despite CME futures being regulated and secure, on unregulated offshore exchanges, retail traders continue to prefer perpetual futures.
These contracts, unlike traditional futures, do not have a fixed expiration. Additionally, they use a mechanism called “funding rate” to keep prices aligned with those of the spot market.
However, the funding rate is charged every eight hours and can be volatile. Thus adding a level of uncertainty and unpredictability that the CME regulated futures do not have.
In other words, the launch of the CME Bitcoin Friday futures represents a new era for cryptocurrency trading. That is, offering news traders and retail investors a more accessible and flexible option to bet on the fluctuations of the price of Bitcoin.
With lower rollover costs, a tighter spread between futures and spot prices, and greater liquidity thanks to alignment with the NAV calculation of spot ETFs, these contracts offer significant advantages over traditional monthly futures.
Thanks to their shorter duration, weekly futures allow traders to implement more targeted strategies, reducing complexity and increasing profit opportunities.
For those looking to leverage key economic events such as inflation data or non-farm payrolls, the CME Bitcoin Friday Futures offer a powerful and versatile tool.