CME Bitcoin Futures Market Closing in on Binance

CME bitcoin futures

Written by:

Anisha Pandey

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The Chicago Mercantile Exchange (CME), a well-regulated entity, has been steadily gaining ground in the Bitcoin futures market, and it now boasts a notional open interest (OI) of $3.54 billion. This impressive figure has propelled CME from the fourth position to now securely hold the second spot among the largest Bitcoin futures exchanges, according to data from Coinglass.

Notably, Notional open interest represents the total U.S. dollar value locked within active or open contracts.

Related reading: SEC Approves First Leveraged Bitcoin Futures ETF

CME Bitcoin Futures

While CME is making substantial progress, it still trails closely behind Binance, an offshore and less regulated exchange, with an open interest of $3.83 billion and a slight lead of 8% over CME.

CME recently celebrated a historic milestone by surpassing 100,000 BTC in open interest for its cash-settled futures contracts. Simultaneously, CME’s market share in the Bitcoin futures sector reached an all-time high of 25%.

CME offers a range of Bitcoin futures contracts, including standard contracts equivalent to 5 BTC and micro contracts, representing one-tenth of 1 BTC. Notably, a significant portion of open interest on offshore exchanges is concentrated in perpetual futures. These unique contracts have no expiry date and employ a funding rate mechanism to remain aligned with the spot price.

Market observers believe that CME’s recent surge may indicate an institutional-led rally in the Bitcoin market. BTC has experienced a notable 27% increase in price this month, driven by ongoing macroeconomic uncertainties and growing optimism regarding the approval of a spot exchange-traded fund (ETF).

However, not everyone sees CME’s rise in the same light. André Dragosch, the Head of Research at Deutsche Digital Assets, offers an alternative perspective. He suggests that CME’s growth may be a result of bearish positions on offshore exchanges being unwound.

He stated:

“CME’s share in BTC futures OI might have increased relative to other exchanges, but the aggregate amount of BTC futures and perps OI has not increased in BTC terms, implying that long futures positions were not the main driver behind the recent surge.”

CME bitcoin futures open interest perpetual
Bitcoin Futures open interest perpetual — Source: X

Binance’s Increasing Regulatory Troubles

Meanwhile, Binance has been grappling with mounting regulatory challenges in various countries. Authorities in the United States, Europe, and Asia have raised concerns about its compliance with financial regulations and its ability to operate legally wihtin their jurisdictions. 

In June, the United States Securities and Exchange Commission (SEC) pressed charges on Binance entities and its co-founder Changpeng Zhao for operating unregistered exchanges, broker-dealers, and clearing agencies. It also alleges the exchange of misrepresenting trading controls and the offering and sale of unregistered securities.

Moreover, the US Department of Justice and the Internal Revenue Service (IRS) are also reportedly examining Binance’s involvement in illicit activities, including money laundering and tax evasion.

As a result, an increasing amount of capital is fleeing the exchange, with users becoming increasingly cautious about the uncertainties surrounding Binance. This exodus of funds highlights the urgency for the exchange to address these regulatory issues and rebuild trust with its user base to maintain its position in the highly competitive market.

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