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

In brief

Solana and XRP futures are CME Group’s fastest growing crypto products.
They have benefited from maturing markets, CME’s Giovanni Vicioso said.
They allow market participants to pursue popular trading strategies, he added.

Bitcoin and Ethereum walked, so Solana and XRP could run, according to Giovanni Vicioso, CME Group’s global head of cryptocurrency products.

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

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

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

Although futures are common tools for financial institutions, Vicioso said that individual investors are participating in the market as well and creating a broader base. Solana futures debuted on CME’s marketplace in March, while XRP futures began trading in May.

Solana and XRP futures reached $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 notional open interest for Solana futures doubled in the following 18 days.

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

When CME first offered Bitcoin futures contracts in 2017, Vicioso said that the firm was establishing a foundation for a market that didn’t have the same regulatory backdrop as it does today. Exchange-traded products tied to Bitcoin didn’t exist either, he said.

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

“Those same strategies that they’ve applied to Bitcoin and Ethereum, we see those strategies now being applied to Solana and XRP,” Vicioso said. “Some market participants look to put on these arbitrage and relative value trades.”

Bitwise Asset Management’s spot Solana ETF debuted on Tuesday, while Rex Shares and Osprey Funds unveiled a similar product for XRP in September. Vicioso noted that people can still engage in basis trades by owning a cryptocurrency in its traditional form.

“What we’ve noticed is that the basis for both Solana and XRP is fairly rich compared to Bitcoin and Ethereum,” he said. “That’s also been a source of volume.”

The debut of futures-based ETFs for Solana and XRP this spring has also been a positive factor by creating a complementary market for the CME’s products, Vicioso said.

“Futures liquidity begets volume on the ETFs and vice versa,” he said. “You had that benefit which, neither Bitcoin nor Ethereum really had a chance to to enjoy.”

Meanwhile, there’s been an “institutional flight to quality” following this month’s crypto crash, which saw $19 billion worth of leveraged positions forcibly closed, Vicioso added. He said the episode showcased the value of market safeguards.

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