The topic of this fireside chat concerns the state of the derivatives market. In particular, there's been a lot of innovation in this sector over the last few months, and even, you know, looking at both the institutional side of the equation, which includes the CME and all the hedge includes the CME and all the hedge funds trading on MA, and the on-chain side, which is a bigger topic for this conference and the Ethereum community in general. So, you know, maybe before we start, why don't we introduce ourselves as panelists, and, you know, I think we want this conversation to be more free-flowing, so I'm sure we'll ask each other questions, but would you like to introduce yourself? Yes, of course. Thank you, thank you, Josh.
And thank you, uh You know, I attended the Bitcoin conference earlier this year, and I can share I can share that the energy there and a certain spirit were not like what I saw here. Hmm, there was a lot of talk about how to make money from Bitcoin, but here I see a lot more, uh, collaboration more, uh, collaboration , a lot more creativity. So there's actually a lot more in terms of showing the space that can actually be done with cryptocurrencies, particularly Ether. I am Giovanni. So, I'm the global head of cryptocurrency products or CME Group.
Hmm, for those of you who are not familiar with CME Group, we are the world's leading derivatives marketplace. Uh, we entered this space in 2016 with the introduction of, uh, the reference rate. Uh, that ended up being what our futures contract, which we launched in December 2017, was based on. We launched Ether Futures in, uh launched Ether Futures in, uh , January 2021 and now list futures and futures options that currently cover nine different cryptocurrencies. Thank you.
Yes. And I run, uh, the trading department of a firm called Falcon X, which is a prime broker, and we are, of course, happy clients of the CME exchange. Um, maybe why don't we start with a lot of the recent products you've launched that have had a more sophisticated institutional bias towards accessing crypto markets. And specifically, I'm talking about, um, volatility indices, which, um, for those of you who are less familiar, there are products that reflect the price of options, um, and you can track that in an index. So, actually, in traditional markets, especially the S&P stock markets, people use this as an indicator of market fear.
Basically, when the index goes up, people want to buy options, um, to protect their portfolio, and if it goes down, that means people think uncertainty has decreased, and so you know stock markets go up, but they usually have a negative correlation with the stock price. Um, in cryptocurrency we're starting to see these products emerge. CME launched, um, one of the first regulated products in this category. Do you want to talk about how this happened and who you're targeting? Yes, of course.
I think what Yes, of course. I think what we've noticed in this space is that there's really been a maturation been a maturation . Um, you see more and more traditional institutions entering this market, and with that maturation, there really comes a need for additional tools to help market participants really manage some of the risks associated with that. When you look at volatility in general, you know, we look at Bitcoin volatility, we look at Ether volatility, it's been relatively low, but when you compare it to other asset classes, it's relatively high, right? Right.
So, with the introduction of our Bitcoin volatility futures, uh, uh, uh, uh, which are a 30-day forecast on the implied volatility as implied in our underlying Bitcoin options contracts, it really gives institutional clients the ability to trade volatility directly, as opposed to having to trade a series of options and delta- options and delta- hedge it. Uh, so we're really bringing simplicity, operational simplicity to the market with the introduction of this product. Yes. And I think I would add that from our side, it was a useful tool for us to not look at the market with a target eye, but really look at how uncertain the price of Bitcoin is, right? Or when an ETH product appears, it will be priced at ETH.
Hmm, a good example would be the approach of summer, when a lot of people were actually buying short options, right? People thought it would be somewhat of a calmer environment for the majors, and in particular, you know, because there's a lot of supply from miners selling and also from digital asset treasuries and so on. But now, because of this huge interest in what Michael Saylor is going to do with the MSTR assets, it's created a lot of uncertainty, and it's caused the option prices to skyrocket, say, from a range of 30 implied V to somewhere around 50, right? So I think a lot of hedge think a lot of hedge funds will voice their opinion on this in traditional markets. They will express their opinions on the VIX index and stocks, but now they have a chance to do the same in cryptocurrency.
Yes, we are very excited to see this happen. Yes, of course. Um, so in that sense, I think not only the price of the options, but also some element of the cost of holding the crypto assets, and that's kind of like the funding rate or, for Ethereum, it's the staking rate, right? So, we've seen a lot of people trying to create products and indices that track Ethereum staking rates. Are you researching this, and are you seeing a lot of demand from hedge demand from hedge funds or other asset managers holding ETH to hedge the returns hedge the returns they get from their Ethereum?
I think that's something that's evolving, right ? Something we noticed with our Ethereum futures contract, right? As I mentioned earlier, we launched Bitcoin futures back in December 2017, we have seen seven years of volume growth, where we have seen consistently higher volumes every year. For the first time last year, our Bitcoin futures volume actually decreased in 2025 compared to 2024. However, we have seen a sharp increase in the volume of our ether futures.
In fact, our ether futures volume tripled last year. And that's significant because now it shows that the market is really moving beyond Bitcoin, right? Of course, what we saw with the passage of the Genius Act last year, we also started to see Ether Salana. So these are platforms that allow, for example, settlement with stablecoins. So we really started to see a lot more interest in the airwaves.
We are also now seeing a larger, relative trading volume in ether compared to bitcoin, where this year around 40% of ether futures volume is about 40% is about 40% of bitcoin futures volume . If we go back to 2024, this ratio will be less than 20%. We also see open interest. So, open interest open interest is an indicator of which institutions, you know, are confident in the market. This is a sign of products being created, structured products being created, and organizations seeking to hedge future volatility.
Isn't that right ? We are also seeing a rise in open interest in Ether, where open interest is now approximately 45% of Bitcoin. So we're seeing a lot more demand, and I think that's really a function of what the Ethereum Foundation has done. Some of the updates we've seen on the network are definitely moving from Proof of Work to Proof of Stake, and having things like staking returns. So we see how institutions adapt, in particular, to broadcasting.
Yes. Um, on your point about broader adoption of Ethereum futures and growth in open interest, I think from our perspective as a trading firm, the more tools we have for altcoins, and, you know, you also added things like Stellar, Ripple, and Salana, the more opportunities there are for hedge opportunities there are for hedge funds to express a differentiated view on assets and cryptocurrency. And I think we already mentioned this in the previous panel. There is now a large dispersion between crypto assets, and this has created an almost ideal situation for funds engaged in token selection, i.e.
liquid funds. Of course, there are much fewer liquid funds now than there were, you know, in the last cycle. But, um, a lot of these portfolio managers are very active now, taking long and short positions, and they can do that more efficiently because there's a liquid market on the CME in a regulated format for these, um, these instruments or for these, um, tokens. Nobody is 100% right , and you know, with the advent of spot ETFs in 2024, you started to see a lot of traditional hedge funds come into the market, and a lot of these hedge funds actually came in to, um, actually came in to, um, put the underlying trade or this difference between the futures contracts relative to the underlying market. So we saw a lot of that activity in 2024, um, some in early 2025, but we actually started to see a decline in the basis.
And, you know, if you look at the basis for both Bitcoin and basis for both Bitcoin and Ether, it's probably down 5% or so right now. So it's not such an attractive trade anymore. So you might think that participants then just chase, say, a relative value game, and then leave the market. But as I mentioned earlier, we are seeing an increase in volume. We are seeing an increase in open positions.
So it really signals what you said, that there's more distribution now, more growth in this space. And I think it also shows what CME has brought to the market in terms of a reliable, trusted, uh, marketplace trusted, uh, marketplace that has brought these, uh, cryptocurrency futures and options to the market . Yes, I think the decline in yields, particularly the underlying yield, hmm, is closely related to the movement in the spot price, right? I think we've seen, um, that cryptocurrency in general is no longer a hot sector. You know, obviously it's artificial intelligence, but, um, the interesting thing is that the appetite for yield hasn't diminished, right?
There 's still a lot of capital and dollars in our industry looking for productive use, and they're going into areas other than, uh, underlying options trading. For example, some people use the options market to generate returns through overwriting, right? Or, um, maybe go a little further down the risk spectrum and deploy directly on the blockchain for, um, pharming capabilities and things like that on the blockchain. So, I mean, on the topic of DeFi and traditional markets coexisting, and traditional markets coexisting, and , you know, a lot of people are talking about convergence, meaning a lot of these markets/ a lot of these markets/ marketplaces will eventually have the same set of products, the same access to collateral, maybe even the same set of users. Um, how do you see the coexistence of CME futures or CME products in general with things like Hyperliquid?
And, you know, now that the CFTC has softened its stance, you're seeing a lot more centralized exchanges centralized exchanges , like Coinbase, Khi, and others, that are hosting perpetual products perpetual products . Yeah, I think when you look at this space, I don't know if it's a market where everyone wins. I think this is a market where there will be coexistence, maybe more hybrid models, right? Um, but of course, when you look at some of these newer protocols, platforms, they're still relatively new, right? Um, and for the most part, it's really untested in terms of what to do if there's a problem in the code, you know, if something goes wrong, you know who I'm supposed to call, right?
It all depends on the code, right? So I think when you look at the involvement of traditional institutional players, larger hedge players, larger hedge funds, those who don't specialize in cryptocurrency, um, when you look at the involvement of banks, for example, I think we're probably still a long way from some of these, um, larger institutions adapting to something like hyper-liquidity technology, right? Yes, I completely agree, and I think it's commendable that a lot of traditional market players have really moved to on-chain market conventions, and I know that CME recently moved to a 24/7 model. Um, I guess the first question is: why do you hate traders now that we can't sleep at night anymore? And I guess the second question is, do you see it being more attractive to e-commerce, cryptocurrency players, or is there a real demand right now from macro hedge funds and so on that want to trade on the weekends?
Yeah, listen, um, I love my weekends too, don't you? But I think the truth is that this is the direction the industry is heading, right? And for us, it's really about providing our client base, both institutional and individual traders, with just giving them the ability to always manage risk. You know, when you look at the cryptocurrency market, as we all know, it's a 247 market. News happens, um, over the weekend.
So, with the introduction of 247, we are simply ensuring that our clients can manage their risks anytime, anytime, any day, whenever they need to. And the natural starting point for this was cryptocurrencies. As I mentioned, this is already a 247 market. And we saw, um, you know, this is our second weekend this is our second weekend , right? Last week we saw a nice increase in trading volumes.
I think we traded over 300 million. Over the weekend, we saw a lot of hedging activity hedging activity , especially with the rise in volatility for both Bitcoin and Ether, and saw more participants enter the market. So I'm very happy about this appearance. Yes, that's great. And obviously, this is important for traders like our firm because we are always looking for opportunities between traditional markets and on-chain markets.
And this really narrows the gap and allows us to literally deal with the CME gap, which a lot of people have been using as an indicator. But it also narrows the gap between arbitrage opportunities and actually opens up more weekend trading opportunities between markets. Yes, continue. No, and we also see a good mix of participants in the market, right? So, you know, we have liquidity providers, you have institutional participants; but we also see significant, um, retail activity on our microcontracts.
When, you know, you look at the volume distribution, most of the volume is actually in these smaller contracts. So we see significant retail participation in this, um, you know, over the weekend as well. Yes, that's great. Uh, with the advent of 247 markets, the next correlation is obviously that I want to be able to secure these contracts that I trade on the weekend, right? Especially if there is a big movement, I need to be able to move collateral to and from the exchange.
Um, or I need to rebalance, say, from a Binance account to a CME account, if you can imagine. Uh, what does the, um, future path look like in this direction in this direction ? Yes. And that's a great question. You know, currently we treat weekends the same way we treat, say, a holiday, meaning there are no calculations on weekends .
So, we are open for trading, but settlement occurs the next business day, right? But, but, to your point, Joshua, I think we need to look at, you know, how we can help our market participants move value in the event that they need to provide additional collateral over the weekend if, if, something happens. So, we have a partnership with Google Cloud Universal Ledger, as well as Beimo, Bank of Montreal. So together we're working on creating something like a tokenized cash solution, right? And we offer market participants this opportunity for those banks that settle through Beimo, allowing them to move value through this network over the weekend.
And we hope that this solution can be implemented later this summer. Yes, this is all very encouraging, and obviously it is only beneficial for firms like us and others in the industry who are actively moving stablecoins all the time on-chain. Um, a question for you on the diversity or spectrum of assets that you're considering adding, right? I think from our side we are seeing a lot of interest in privacy narratives, and I think even some of the talks at this conference focused on the privacy roadmap for Ethereum. Um, I think we're seeing, you know, obviously, there's been a lot of volatility in the last few days regarding the Zcash crash.
Um, what do you think is the scope and how easy it is to expand the list of things that can be traded on the CME beyond, you know, maybe the six or seven assets available today? And I think from a privacy perspective and the complexity of adding new assets that are, um, not just Proof-of-Work tokens, but also, um, other considerations like maybe the securities law aspects for certain tokens like hyper-liquid tokens and so on. Yes. So, for us, first of all, it's about having clear regulation, right? Um, you know, as I mentioned earlier, we launched Bitcoin 2017, Ether 2021.
It took us almost four more years to launch Salana and XRP, and this year we launched five more cryptocurrencies. Much of this is now due to greater regulatory convenience. But in addition to these, let's say, futures and options on futures that we place, we also have a family of over 30 different, let's say, real-time reference rates and indices . As I mentioned, we cover, let's say, about 30 different, let's say, coins and tokens. So this gives us, let's say, a basis to work from in terms of maybe additional cryptocurrency contracts or futures contracts that we launch.
In addition to, say, regulatory clarity regulatory clarity , we also need to see customer demand, right? So when we see customer interest in a particular coin and say that this coin has, let's say, passed regulatory reviews, let's say, we are more than happy to allow the listing of that additional coin. Another area where we are currently seeing a lot of interest is cryptocurrency indices. So the idea is not to pick, um, a specific coin, but to actually, um, allow the market to access the cryptocurrency space. And we recently launched, um, futures on the NASDAQ CME Crypto Index, which currently consists of eight different underlying cryptocurrencies.
I like it. Um, a lot of innovative products from you , and, um, obviously, we're excited to be a partner of the exchange, and, um, you know, we hope to see it grow further in the coming years. So I'm very happy and thank you. Yes, thank you for this conversation, and thank you guys.
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