As both interest in and adoption of bitcoin continues to accelerate, there is increased interest from market participants to engage in the thriving cryptocurrency market. If the standard Bitcoin futures contract with its five bitcoin multiplier was not the right size for your trading strategy, or if the price appreciation of bitcoin itself has made the standard contract too big, there is now a new tool that you can use to access the market and manage your risk – Micro Bitcoin futures.
CME Group is launching the Micro Bitcoin futures contract ‒ a smaller-sized contract allowing an efficient and cost-effective way to hedge bitcoin price risk or fine-tune bitcoin exposure. This contract will provide the same features as the standard contract with a smaller capital requirement.
Similar to the standard sized contract, Micro Bitcoin futures (ticker symbol MBT) is a USD cash-settled contract based on the CME CF Bitcoin Reference Rate (BRR) ‒ which serves as a once-a-day reference rate of the US dollar price of bitcoin. The BRR aggregates the trade flow of major bitcoin spot exchanges during a one-hour calculation window into the US dollar price of one bitcoin as of 4 p.m. London Time.
While a standard-sized Bitcoin futures contract is equivalent to five bitcoin, the Micro Bitcoin futures contract is equivalent to one-tenth of one bitcoin ‒ making the micro contract 1/50 the size of the larger Bitcoin futures contract.
For example, if the price of bitcoin (as tracked by the BRR) is $50,000, the notional value of one Micro Bitcoin futures contract is $5,000.
The tick increment of Micro Bitcoin futures is five index points, making a one tick move in the Micro Bitcoin contract equivalent to $0.50.
This equates to a cost-efficient way to participate in the growing bitcoin market. Micro Bitcoin futures are listed on the nearest six consecutive monthly contracts, inclusive of the nearest two December contracts.
For example, assume it’s January and the six consecutive contract months are January, February, March, April, May, and June. In addition, that year’s December contract plus next year’s December contract will also be listed. As one contract expires, the next contract to complete the six-month lineup is added. When the December contract expires, the June contract becomes active along with the December contract for the next year. So, at any time, there are six consecutive monthly contracts and only two December contracts listed. This process continues throughout each year.
Micro Bitcoin futures will follow the same expiration as the larger contract ‒ expiring the last Friday of the month and settling in cash to the CME CF Bitcoin Reference Rate on the last day of trading. Micro Bitcoin futures will trade Sunday through Friday, nearly 24 hours per day and will be block trade eligible.