Trade Bitcoin & Ethereum derivatives your way

What user base was the FTSE nano futures designed for?

Eurex designed nano futures for smaller investors who lack larger firms' scale and capital resources. For these investors, precision is valuable. Nano futures, which are even smaller than micro futures, offer that precision as an accessible entry point into the two main cryptocurrencies. Both contracts are cash-settled and reference the FTSE Bitcoin and Ethereum indexes.

While the average micro contract is one-tenth of a normal contract, nano futures offer investors exposure equal to one-hundredth of a Bitcoin or Ethereum coin. With the price of one Bitcoin recently fluctuating between $80,000 and $100,000, an instrument that enables $800-$1,000 of exposure is particularly well-suited to the needs of smaller-scale investors.

In addition, users will benefit from lower upfront costs and other traditional benefits of the exchange-traded format, such as transparency and capital efficiency. These cost efficiencies can make a major difference in profitable trading for firms operating at the smaller end of the market.

Investors can also expect a significant advantage from very tight pricing in the order book from launch onwards, with a tier-one liquidity provider already committed to the market.

Eurex has also been active on the options side, releasing iShares Bitcoin Options alongside the nano futures. What is the story behind these options?

The iShares Bitcoin options are part of a significant overall momentum for European cryptocurrency participation. BlackRock’s recent introduction of the iShares Bitcoin ETP in Europe will make most market participants remember the US asset managers’ Bitcoin ETF launch. It transformed the profile of that region’s participation in the asset class. While cryptocurrency ETPs do already exist in Europe, BlackRock's size and brand recognition will likely take the market to a whole new level.

Options are crucial to the evolution of any ETF ecosystem, and with Eurex’s launch of these products, we are accelerating that trajectory in Europe.

We will offer iShares Bitcoin ETP options in both euros and USD, referencing XETRA and Euronext Amsterdam prices. It should be noted that momentum is already healthy in the underlying, with tight spreads already quoted on IB1T and the ETP AUM past the $200m mark.

Those who invest in the European ETP can effectively manage their downside protection, sell calls during calmer market conditions, and trade volatility — in short, take advantage of all the functions that options and ETFs or ETPs traditionally offer.

What are the advantages and differences between all these new forms of exposure to cryptocurrencies?

BlackRock’s US Bitcoin ETF launch was a milestone for the market, and for good reason. ETPs offer market participants access to cryptocurrencies through traditional brokerage platforms while also delivering lower trading and custody costs through economies of scale. The products also have administrative advantages. 

Eurex’s nano futures offer a secure mechanism for leveraged exposure to the market while ensuring the security of funds. An established futures exchange ticks many boxes for an asset class that many remain cautious about. Market participants have peace of mind from well-established, tested, and invested-in infrastructure, a clearing house, and the safety of their funds. In fact, futures trading at an exchange like Eurex automatically eliminates many concerns market participants have around custody in native crypto exchanges.

It should also be noted that, with this launch, the popular crypto futures spot basis trade is now available on a European exchange. This is already one of the most popular crypto trades in other regions, such as the US. Now, it will be accessible with nano futures (or any other Eurex future) vs. the IB1T GY ETP. 

Meanwhile, the ETP options allow for greater risk management and trading strategy flexibility, as mentioned above. It should also be noted that the ETP options can be used in conjunction with a spot crypto portfolio. iShares Bitcoin ETP creates a one-for-one exposure to Bitcoin, so these options are a perfectly viable tool for traders looking to manage their Bitcoin wallet risk.

How important are listed options already as a part of the cryptocurrency ecosystem? 

There is already a high volume of options traded globally that reference crypto ETPs. This has significantly improved price discovery in the overall cryptocurrency ecosystem. At Eurex, we anticipate that this will support the development of liquidity in the iShares Bitcoin ETP options market.

As mentioned before, options offer a greater range of flexibility in trading — a feature that will naturally attract a wider diversity of investors over time.

To re-emphasize, these options will allow ETP holders to purchase downside protection with puts and put spreads.

Additionally, users will be able to capture upside convexity and adjust the leverage of their positions. For others, options can be used for yield enhancement, as the traditionally elevated volatility of spot cryptocurrency markets allows for premium-generating option writing strategies.

Despite its focus on smaller investors, these new options will also be an important tool for institutional investors, such as asset managers and multi-asset hedge funds. The contracts are readily available and can be traded similarly to iShares Physical Gold ETF options, which are already popular among this community.