How Solana and XRP Futures Became CME’s Fastest Growing Crypto Products

Bitcoin and ethereum he walked, like that Solana and XRP could run, according to Giovanni Vicioso, CME Group’s global head of cryptocurrency products.

The world’s leading derivatives market began offering futures contracts for smaller cryptocurrencies earlier this year, and they’re getting a boost from infrastructure and liquidity that wasn’t there before, Vicioso said. Decrypt on wednesday

“These products, hands down, have been our fastest growing,” he said. “Solana and XRP had an ‘acceleration advantage,’ if you will, because they were able to take advantage of the learnings we saw in the market with the launch of Bitcoin and Ethereum.”

On Monday, CME products linked to Solana and XRP reached record open interest, with about $3 billion of contracts outstanding, a spokesperson said. Decrypt. Those contracts allow market participants to manage risk or speculate on future price movements.

Although futures are common instruments for financial institutions, Vicioso said that individual investors also participate in the market and create a broader base. Solana futures debuted on the CME market in March, while XRP futures began trading in May.

Solana and XRP futures hit $1 billion in notional open interest on the same day in August. Although XRP futures passed that mark in a shorter period of time, Vicioso noted that the notional open interest for Solana futures doubled in the following 18 days.

“We haven’t seen it before,” he said, adding that Solana futures averaged nearly $700 million in daily trading volume on a notional basis in October.

When CME first offered Bitcoin futures contracts in 2017, Vicioso said the firm was laying a foundation for a market that did not have the same regulatory background as it does today. Exchanged products linked to Bitcoin do not exist yet, he said.

Regulatory clarity has unlocked more market participants in the United States, while ETFs have allowed them to pursue popular strategies, such as the so-called basis trade, which capitalizes on small differences between the spot price of an asset and the future price, he explained.

“These same strategies that have been applied to Bitcoin and Ethereum, we are now seeing these strategies being applied to Solana and XRP,” Vicioso said. “Some market participants are trying to get on these arbitrage and relative value exchanges.”

Bitwise Asset Management’s Solana ETF spot debuted on Tuesday, while Rex Shares and Osprey Funds revealed a similar product for XRP in September. Vicioso noted that people can also engage in basic transactions to own a cryptocurrency in its traditional form.

“What we noticed is that the base for Solana and XRP is quite rich compared to Bitcoin and Ethereum,” he said. “It’s also been a source of volume.”

The debut of ETFs based on futures for Solana and XRP this spring was also a positive factor creating a complementary market for the products of the CME, Vicioso said.

“The liquidity of futures generates volume on ETFs and vice versa,” he said. “You got that benefit that neither Bitcoin nor Ethereum really had the opportunity to enjoy.”

Meanwhile, there was an “institutional flight to quality” followed this month’s crypto crashwhich saw $19 billion of leveraged positions closed by force, Vicioso added. He said the episode showed the value of market safeguards.

“The core differentiator, if you will, is really regulation,” he said. “We have a breakdown in terms of customer protection that you don’t necessarily see on some of these unregulated platforms.”