BlockFi Eyes Institutions, Deepens Liquidity for CME Bitcoin Futures

This deepens bitcoin’s exposure to traditional markets. Centralized finance lending service BlockFi announced that it will now provide liquidity for the CME. The launch of bitcoin CME futures in 2017 was one of the bullish events that led to that year’s massive spike in bitcoin’s price. The deepening of liquidity for bitcoin options and futures on the CME will create better opportunities for institutional investors. Now, they will be able to hedge bitcoin exposure, or “harness its performance,” better than before. BlockFi Chief Risk Officer Rene van Kesteren underlined this push toward institutional  investors, saying:

 “Today, we can negotiate and submit bitcoin futures and options block trades for clearing via CME Clearing, which represents a critical step in bitcoin’s advancement with institutional investors.”

Speeding Big Adoption

Many in the crypto community are hoping to spur continued attention for bitcoin in mainstream finance and institutions. Recently, large public corporations have been purchasing bitcoin for their treasuries. One advantage of deeper liquidity on the CME is that it theoretically legitimizes bitcoin to naysayers. Because prices will be based on the CME CF Bitcoin Reference Rate, investors may feel like they are getting a “more correct” price that has not been manipulated. Also, CME futures expirations are often used as a predictor or indicator of bitcoin’s financial health. A filled gap in futures is often seen as bullish for the BTC price. Open interest in the CME’s bitcoin futures has been growing, according to Skew research.

CME now #2 for total open interest in #bitcoin futures pic.twitter.com/1zXetn1Zsj

— skew (@skewdotcom) October 23, 2020

Still, this is not the first time BlockFi has pitched itself as attractive to the mainstream. BlockFi works in conjunction with Gemini, one of a few on-ramps geared towards compliance and regulation. This has garnered the company backers including securities broker giant Fidelity Investments. Meanwhile, Binance, one of the largest crypto exchanges, was accused of trying to dodge regulators after an internal document was leaked online. Binance later defended itself against the allegations.  While many are still resistant, some on Wall Street are cozying up to crypto. Even mammoth bank JPMorgan has started using its own digital currency. Cryptocurrency evangelist and billionaire investor Mike Novogratz has said “the herd is coming.” If the herd includes Wall Street (well, Chicago) investors, this is another step in that direction.