Micro Bitcoin Futures | A Lower Cost, Regulated Way to Trade Crypto


This article on CME’s Micro Bitcoin Futures is the opinion of Optimus Futures.

Micro Bitcoin Futures

  • Micro Bitcoin Futures are scheduled to begin on May 3, 2021.
  • Offering a tenth of the exposure of standard bitcoin futures, Micro Bitcoin Futures may be a cost-efficient way to gain bitcoin exposure.
  • Unlike the cryptocurrency itself, Micro Bitcoin Futures are traded in a regulated market–a potential relief to traders who feel comfortable trading in a transparent and regulated environment.
There is a Bitcoin bandwagon that’s gaining steam as new first-time passengers are rushing the doors to gain entry. There’s even star power behind the craze–Elon Musk, for example, whose company Tesla purchased $1.5 billion worth of bitcoin. 2021 saw the most “valuable” cryptocurrency take off in a string of skyrocketing rallies after having wallowed at a two-year swamp.

Yet the crypto world is still highly obscure, its values and adoption murky. That’s enough to scare any trader who wants in on the action yet is hesitant upon realizing risks that are not easily understood nor calculated. However, there’s a lower-cost and regulated way to enter the market: Micro Bitcoin Futures, to be launched on May 3, 2021, by the CME Group Inc.

What Are Micro Bitcoin Futures?

Traders who want to speculate on bitcoin without actually holding the crypto itself can use the futures market to gain exposure to the asset. Standard bitcoin futures have surged over the last year as investors have begun piling into the actual cryptocurrency.

Yet, bitcoin futures may not be as accessible to traders with smaller accounts. It may be discouraging to those who are interested in bitcoin via derivatives but aren’t comfortable with the size of the exposure that standard bitcoin futures offer.

So, the solution is to “go smaller,” and Micro Bitcoin Futures (MBT) may provide an answer to that demand. Like other futures contracts, CME Micro Bitcoin Futures are traded on margin–borrowed money.

That allows you to control a larger position with relatively little money down. Again, that’s a two-sided blade that can work in your favor, or against you, depending on the direction of the asset and the size of your positions.

Let’s take a look at its features:

  • Micro Bitcoin Futures are a tenth of the size of your standard bitcoin futures.
  • The minimum price fluctuation is $0.50 per tick.
Overall, Micro Bitcoin Futures provide a cost-effective way to either “trade smaller” or to fine-tune a hedge should you plan on protecting actual bitcoin exposure, especially if your bitcoin holdings are “partial.”

Why Trade Micro Bitcoin Futures?

If we were to focus solely on this new instrument, the reasons to trade it are obvious from the features described above. But let’s look at it from a larger and more comparative perspective.

Why trade MBT and not bitcoin futures or bitcoin itself?

MBT may generate more volume than standard bitcoin futures

Who has $54,000 to buy one bitcoin? Most retail traders can’t afford it. Yet, retail traders are swarming the cryptocurrency. How are they doing it? Partial ownership. You can log in to PayPal or other e-payment systems (where cryptos are available) and convert your cash to bitcoin or other cryptocurrencies for full or “partial” exposure/ownership.

The same logic applies to MBT versus standard bitcoin contracts. Traders who buy or sell bitcoin derivatives are likely not interested in ownership. Many are day traders or swing traders (not investors). They are interested solely in exposure rather than ownership. What they’re seeking is the capacity to make short-term or intermediate-term bets on bitcoins fluctuations, whether bullish or bearish.

MBT can also make it easier and “cheaper” to hold bitcoin exposure for longer periods of time, as maintenance margins may be much smaller than those of the standard contract. In addition to this, retail traders can fine-tune their exposure by adding contracts to match their preferred risk levels. Building a position from a single contract with minimal exposure may be a much better alternative to holding an oversized position that exceeds your risk capital and risk tolerance.

Smaller exposures may also provide a more “controllable” means for retail traders to access this new market. And the potential benefit of fractional exposure may be rewarded by higher levels of interest among the retail crowd and, in turn, higher levels of trading liquidity.

Unlike Bitcoin itself, the futures market is a regulated industry

If you are not a hardcore HODLer, if you’re not purchasing bitcoin as an ideological middle-finger gesture aimed at the Federal Reserve or banking system, or if you’re not “investing” in bitcoin to hedge your dollars, then you’re probably in the market for speculative purposes.

If that’s what you’re after, then perhaps the most efficient way to go about your trading endeavors is to operate in a regulated market environment.

The process of buying and selling futures is much simpler and more efficient. And should you have a trading dispute, you can clear any misunderstandings with your broker who can track your buys and sells on the exchange.

You can short-sell bitcoin in the futures market

So, what if you anticipate a plunge in bitcoin prices and want to bet against the coin or hedge your actual exposure? You can’t short-sell the spot currency but you can go short bitcoin in the futures market.

Let’s suppose you hold bitcoin and forecast a decline. You can only hedge your position in the futures market, as there’s no direct equity-based instrument for bitcoin at this time.

The ability to go long and short bitcoin is a feature that may be available only in the futures market. And depending on your trading objectives or your stake in the cryptocurrency market (e.g. holding actual bitcoin), the capacity to go long and short may give you a tremendous amount of flexibility that you otherwise would’ve never had in the actual cryptocurrency market.

Is Bitcoin a Legitimate Market?

People wonder whether bitcoin will be able to sustain its popularity and volume as a traded financial instrument over time. Yes, it is popular and has many “star” figures (like Elon Musk) supporting the currency.

But is it an actual currency? No, or at least, not yet. Truth is, it doesn’t have widespread adoption.

Is bitcoin a reliable store of value? If you feel that an extremely volatile instrument can be “reliable” as a store of value, then yes, it is. Most people don’t, however.

Is bitcoin a safe-haven asset that can protect your wealth against inflation? Perhaps, but it has no real history as an inflation hedge simply because it’s still an emerging asset. There are other inflation hedges out there that have a much longer track record–like gold, silver, real estate, and other physical assets,

So, what is bitcoin? It is a highly speculative instrument to trade or invest in. It’s an instrument for speculative growth.

Along with other cryptocurrencies, however, it is becoming a standard part of our financial system, if only for the purposes of speculation. And the Coinbase IPO may help legitimize bitcoin and other cryptocurrencies as a widely adopted “asset class.” Beyond this, however, we’ll have to see how the crypto saga will unfold.

Who Are the Crypto Market Makers?

Market makers help increase liquidity and stabilize prices by facilitating trades between buyers and sellers. In the era of digital currency, this process can be exceedingly complex as exchanges are not as regulated as standard markets (some are not regulated at all), and the crypto markets operate 24/7.

The top crypto market makers include firms like AlphaTheta, CSR Markets, Kairon Labs, and Bluesky Capital. We are not going to get into “how” they make markets, as the technological aspect of each company’s operation exceeds the scope of this article.

In contrast, the futures market may operate in a similar manner. The difference is that the transparency of the process and the data of each transaction is recorded by the CME group and subject to regulation and scrutiny.

The crypto markets can be risky, but there’s no need to deal with risks stemming from a lack of industry regulation when you have a (presumably) more transparent option available to you.

What Are the Risks of Trading Bitcoin Futures?

1 – Weekend Risk: Bitcoin trades 24.7. In contrast, the bitcoin futures market closes on Friday. Should bitcoin in the crypto market undergo a tremendous plunge or rally during the weekend, then you may have no way to close your long or short position. This means that bitcoin futures are subject to large gaps between week’s close and open. So, if you’re holding positions over the weekend, make sure you have enough “risk capital” to cover it.

2 – Volatility and Event Risk: Hopefully, you’re well aware that bitcoin can be an exceedingly volatile market. Its fundamentals are not necessarily clear and it rides on sentiment more so than other assets with clear fundamentals. With that said, the risk of volatility should be well-understood, as it’s one of the primary reasons why traders choose to engage in this market. Short of solid fundamentals to assess bitcoin, any news, whether validated or not, can significantly affect the currency which, in turn, will be reflected in the futures prices. The outcome can be beneficial or adverse, depending on the news.

3- Risks in the Underlying Market: What happens in the cryptomarkets will likely affect its derivatives. Should an exchange collapse, should the Federal Reserve decide to rein-in cryptocurrency trading, should the digital dollar (still in development) usurp liquidity from private digital currencies like bitcoin, or should regulators impose rules that may affect operations in the crypto field, you will likely see bitcoin futures follow the coin itself. This can be favorable or unfavorable, depending on the events and the circumstances.

4-Risk of Hacking on Exchnages: Sadly even the most advanced exchanges with storing emphasis on cybersecurity get hacked. While these events occur on the crypto markets, their effects could triple in the futures markets in a large magnitude.  Consider if we face a hack or encounter a potential hack on a major exchange such as Coinbase, it could be reflected in high volatility and sharp declines in the Bitcoin futures.

The Bottom Line

As you can see there are a lot of pros and cons to trading standard or micro bitcoin futures. You need to weigh the risks and opportunities in order to get a better feel as to which asset might be more suitable, if at all, to your trading goals.

Bitcoin is a highly speculative asset. Its origins as an alternative currency that circumvents the banking system and government oversight is far different from its current function as a dollar hedge and speculative trading asset. But if you are interested in getting in on a little bitcoin action, then perhaps Micro Bitcoin Futures may be a favorable way to test the market.

Disclaimer: Virtual currencies including Bitcoin experienced significant price volatility, and fluctuations in the underlying virtual currency’s value between the time you place a trade for a virtual currency futures contract and the time you attempt to liquidate it will affect the value of your futures contract and the potential profit and losses related to it. Be very cautious and monitor any investment that you make. There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Please be aware, however, that just because futures on virtual currencies, including Bitcoin, must be traded on regulated futures exchanges does not mean that the underlying virtual currency markets are regulated in any manner and what occurs in a virtual currency’s underlying market will impact the price of a virtual currency’s futures contract


See the link below from the National Futures Association for more information.


Additionally, the Commodity Futures Trading Commission (“CFTC”) has made available a Virtual Currency Resource Web Page designed to educate and inform the public about this topic and its risks. See the link below for further information from the CFTC.


CME Micro contracts generally have a value and margin requirement that is one-tenth (10%) of the corresponding regular contract.  The cost of trading Micro contracts is higher than regular contracts when measured as a percentage.  Commission rates are not always one-tenth of the rate for regular contracts. Exchange and NFA fees are not proportionately reduced.  Frequent trading of Micro contracts further compounds the cost disparity. Futures transactions are leveraged, and a relatively small market movement will have a proportionately larger impact on deposited funds.  This may result in frequent and substantial margin calls or account deficits that the owner is required to cover by depositing additional funds.  If you fail to meet any margin requirement, your position may be liquidated, and you will be responsible for any resulting loss. 

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