Binance Overtaken in Largest Share of Bitcoin Futures Open Interest

CME has surpassed Binance in securing the predominant share of Bitcoin futures open interest, marking a notable shift in the landscape after Bitcoin’s resurgence beyond the $37,000 threshold, a level not seen in over 18 months.

Analysts have observed this intriguing ‘flippening,’ wherein the traditional derivatives marketplace heavyweight, Chicago Mercantile Exchange (CME), has outpaced Binance, the global cryptocurrency exchange, in terms of Bitcoin futures open interest.

Open interest, a crucial metric in futures and options markets, quantifies the total number of outstanding contracts held by traders at any given moment. It hinges on the disparity between contracts held by buyers (longs) and those held by sellers (shorts).

James Seyffart, a research analyst specializing in exchange-traded funds (ETFs) at Bloomberg Intelligence, echoed an observation by Will Clemente on X (formerly Twitter), raising questions about whether the escalating Bitcoin futures open interest on CME would address historical concerns of the United States Securities and Exchange Commission (SEC). The SEC has, for years, expressed reservations regarding the depth of Bitcoin markets and the potential for market manipulation.

This concern has been a sticking point, causing the SEC to withhold approval for numerous spot Bitcoin ETF applications. Notably, the regulator informed major players like BlackRock and Fidelity that their filings were deemed “inadequate” due to the absence of crucial declarations regarding the markets underpinning the valuation of Bitcoin ETFs.

In July 2023, the Chicago Board Options Exchange (CBOE) resubmitted a proposal for Bitcoin spot ETFs after receiving feedback from the SEC. Fidelity plans to launch its Bitcoin ETF on CBOE, while BlackRock, the world’s largest asset manager, made headlines with its Nasdaq-listed Bitcoin ETF proposal.

In its revised submission to the SEC, CBOE emphasized its commitment to strengthening mechanisms for detecting, investigating, and preventing fraud and market manipulation related to shares in the proposed Wise Origin Bitcoin Trust.

The exchange stated its anticipation of entering into a surveillance-sharing agreement with Coinbase, a prominent operator of a United States-based spot trading platform for Bitcoin, which constitutes a significant portion of both US-based and USD-denominated Bitcoin trading.

CBOE’s filing elaborated that this agreement with Coinbase is poised to embody the characteristics typical of a surveillance-sharing agreement. This arrangement will afford CBOE additional access to Bitcoin trading data on Coinbase, enhancing its oversight capabilities.

Furthermore, CBOE pointed out that data from Kaiko Research indicated Coinbase’s representation of approximately 50% of the U.S. dollar to Bitcoin daily trading volume in May 2023. This statistic assumes significance in light of the SEC’s reservations regarding the depth of Bitcoin markets as they relate to supporting ETF products.

A surveillance-sharing agreement, as outlined by CBOE, serves the crucial purpose of enabling exchanges and regulatory bodies to identify potential manipulation of stock or share values by market actors.