The traditional derivatives marketplace giant, Chicago Mercantile Exchange (CME), has outpaced Binance in Bitcoin futures open interest. This shift comes on the heels of Bitcoin’s resurgence, breaking the $37,000 barrier for the first time in over 18 months.
Analysts Weigh In on the ‘Flippening’
Market analysts are abuzz with discussions about the ‘flippening’ of Binance by CME. The latter now holds the largest share of Bitcoin futures open interest. This marks a significant change in the dynamics of the cryptocurrency market.
Open interest is a crucial concept in futures and options markets. It serves as a metric to measure the total number of outstanding contracts. Additionally, it represents the sum of contracts held by traders at any given time, with the difference between longs (buyers) and shorts (sellers) determining open interest.
James Seyffart, a research analyst at Bloomberg Intelligence, raised questions about whether CME’s increasing Bitcoin futures open interest would address historical concerns of the United States Securities and Exchange Commission (SEC). The SEC has long hesitated to approve spot Bitcoin ETF applications due to worries about market depth and potential manipulation.
CBOE’s Efforts to Secure Approval
In July 2023, the Chicago Board Options Exchange (CBOE) refiled a submission for Bitcoin spot ETFs, incorporating feedback from the SEC. Fidelity and BlackRock are also making significant strides in the ETF space. This is with plans to launch products on CBOE and Nasdaq, respectively.
To address SEC’s concerns, CBOE plans to enter a surveillance-sharing agreement with Coinbase, a leading U.S.-based spot trading platform for Bitcoin. This strategic move aims to provide supplemental access to Bitcoin trading data, enhancing the overall surveillance capabilities.
Reassuring Data from Kaiko Research
CBOE’s filing references Kaiko Research data. This further indicates that Coinbase represents around 50% of the U.S. dollar to Bitcoin daily trading volume as of May 2023. This data is crucial in alleviating SEC’s concerns regarding the depth and reliability of Bitcoin markets supporting ETF products.
Notably, such agreements are designed to empower exchanges and regulators in detecting potential market manipulation. This will further ensure transparency and integrity in the valuation of stocks or shares.