Futures will be the best crypto game in town even after a Bitcoin spot ETF

He Chicago Mercantile Exchange (CME) has long been the home of cryptocurrencies for traditional financial investors, and this is unlikely to change, even with the approval of a Bitcoin spot ETF.

Activity on the CME has expanded significantly over the past 12 months. The CME now sees more Bitcoin (btc) futures trading than the world's largest crypto exchange, Binance. BTC open interest on the CME now represents 24.7% of the entire market, making it the world's leading Bitcoin futures trading venue.

While some of this activity is almost certainly related to the anticipation of the approval of a spot ETF, the launch of one or more will not lead to a reduction in activity in the futures market. In fact, futures trading is likely to expand rather than contract when the SEC finally grants BlackRock et. Alabama. the green light.

Related: History tells us we are in for a strong bull market with a hard landing

There is no doubt that a spot ETF will bring large flows of institutional money into the sector. However, it will not change the basic fundamentals of Bitcoin liquidity. As we know, the supply of Bitcoin is capped at 21 million. That means the futures market is the only place where real trading action can take place.

The CME has been successfully used by Goldman Sachs, Morgan Stanley, JP Morgan and others to trade cryptocurrency instruments for years, and they have been using futures to do so. Futures remain the preferred instrument because liquidity is the main problem in the spot market. These huge institutional investors could buy bitcoin at any time, but liquidity remains the main drawback, not the lack of a spot ETF.

Institutional investors using the CME are also very sophisticated. As such, any fund manager who takes a position in the BlackRock Spot ETF, for example, will want to hedge that position using futures on the CME. Consequently, we can expect activity on the CME to grow at about the same rate as the growth of spot ETFs.

Futures are also, as we know, a speculative instrument, and there is perhaps no market that is more speculative than that of cryptocurrencies. As the asset class gains more legitimacy and credibility with the approval of a spot ETF, we will see more investors interested in all corners of digital asset trading.

Related: Bitcoin ETF: A $600 Billion Turning Point for Crypto

Adventurous day traders who may have stuck to the forex market in the past will likely start venturing into Bitcoin and other crypto instruments. And they will exercise this interest through the CME. In fact, I suspect we will see growing interest in perpetual swaps and other types of derivative instruments in the sector next year.

Cryptocurrency futures also benefit from clearer and more consistent regulation, which is another important factor here. While the Commodity Futures Trading Commission (CFTC) deals with futures, no one has yet decided who deals with the cryptocurrency spot market from a regulatory perspective, and this remains an issue. Applications for these Bitcoin spot ETFs are currently on the Securities and Exchange Commission's desk, but as has become abundantly clear, Chairman Gary Gensler is a big fan of ambiguity.

Clear regulation is leading to evident success in cryptocurrency futures, while the spot market is hampered by regulatory opacity. And so, while the approval of an ETF is just a matter of time at this stage, we still don't know how long. While we wait, the futures market remains an extremely attractive trading ground for institutional investors.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.