$10 Billion Fund Set to Trade CME's Bitcoin Futures

The world-renowned investment fund, Renaissance Technologies, outlined in a recent filing that they will begin trading Bitcoin futures contracts on the Chicago Mercantile Exchange (CME).

$10 Billion Fund Set to Trade CME's Bitcoin Futures

Key Takeaways

  • The $10 billion Medallion Fund has been given the nod to trade CME Bitcoin futures.
  • CME’s illiquidity may prove to be an impediment to efficient position sizing for Medallion.
  • There are several positive implications that arise as one of the world’s largest hedge funds publicly states they are ready to trade the asset class.

Share this article

Renaissance Technologies’ flagship Medallion fund has returned 24% year-to-date while most institutional funds have taken a beating. Dubbed the world’s greatest hedge fund, Medallion has received permission to trade Bitcoin futures over the Chicago Mercantile Exchange (CME). 

Trading Bitcoin on the CME

Jim Simons, the founder of Renaissance Technologies, is considered one of the greatest traders of his time. Under Renaissance lies the Medallion Fund, which has earned investors a gross average return of 66.1% per year between 1988 and 2018.

For comparison, the S&P 500, a bellwether for the American economy, had a gross return of 11.66% over the same period. Simons’ fund counts $10 billion in assets under management at the time of press.

The Medallion fund listed Bitcoin futures as a potential trading vehicle on page 16 of a brochure filed with the SEC on Mar. 30. It will reportedly trade Bitcoin futures over the CME’s institutionalized platform. 

In the filing, Medallion highlights Bitcoin’s risky investment profile, stating “investments of this type should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments.” 

Beyond this, the firm also identified 11 other “associated risks” with regulatory uncertainty and the potential for fraud as the primary.

Source: Medallion

CME has been a relatively illiquid platform for trading Bitcoin since it’s launch in 2017. This is because most BTC volume tends to accrue on platforms like BitMEX and Binance that have more reasonable margin requirements.

Choosing CME could affect Medallion’s ability to efficiently trade Bitcoin, forcing them to take very small positions.

A 1% position size for Medallion, for instance, would make up 50% of CME’s Bitcoin futures open interest at the time of writing. 

Medallion’s AUM dwarfs open interest and volume on CME, via Skew.

Medallion’s foray into Bitcoin is nonetheless huge news for the crypto industry. It indicates continued interest in BTC from large financial brands. 

Ray Dalio of Bridgewater Associates, a rival hedge fund, has already shown his disdain for Bitcoin.

Dalio stated that the genesis cryptocurrency is not a good alternative investment as it is neither a medium of exchange nor a reliable store of value. 

Though the industry already has its own financial stalwarts in the form of Pantera Capital and others, the entrance of reputed players, like Dalio and Simons, could give Bitcoin’s reputation with legacy traders a major boost. 

Share this article