Bitcoin: from Pet Rock to Loan CollateralCME: Micro Bitcoin Futures ( CME:MBT1! ) and Micro Ether Futures ( CME:MET1! )
Last week, JPMorgan Chase Chairman and CEO Jamie Dimon acknowledged that crypto, blockchain, and stablecoins are "real”, and “we’ll all use them". This marks a notable shift in tone from the longtime Bitcoin critic.
I can’t help but recall the most notable quotes over the years:
• “Cryptos are decentralized Ponzi scheme”.
• Bitcoin is “fraud” and "worse than tulip bulbs".
• “I’d fire in a second any employee trading Bitcoin”.
• "Bitcoin itself is a hyped-up fraud, it's a pet rock".
Why the big change of heart? It has a lot to do with the sweeping changes in the regulatory landscape. The biggest US bank has to adapt and meet new customer demands.
• On January 10, 2024, the SEC approved Bitcoin ETFs for the first time.
• On May 24, 2024, Ethereum ETFs were also approved by the SEC.
• On November 4, 2024, Donald Trump won the US presidential election.
• On January 21, 2025, the SEC, under a new Chairman, created a Crypto Task Force.
• In May 2025, JPMorgan announced that it would accept shares of BlackRock’s iShares Bitcoin Trust (IBIT) as loan collateral from its clients.
• On July 18, 2025, US Congress passed the “GENIUS Act”, setting up new regulatory framework for the issuance and use of stablecoins.
• On August 7, 2025, an Executive Order calls for the Department of Labor to re-examine its guidance on alternative assets like cryptocurrencies in 401(k) plans.
• Last week, JPMorgan announced that it would accept Bitcoin and Ethereum as collateral for institutional loans by the end of 2025.
The latest two events could have profound impact. Two butterflies have flapped their wings in Washington, D.C. and at Wall Street. These actions, in my opinion, will unleash the biggest tornado to sweep up the entire crypto world. So far, the market has not put much thought around it. Bitcoin lost 7% since August.
In my trade idea published on August 12th, I discussed how the crypto market would benefit from the new pool of capital infusion from the $8.7 trillion 401(k) plans.
What is Securities-based Lending?
Securities-based lending, also known as portfolio lending, enables borrowing against the value of their marketable securities without having to liquidate them. It is primarily offered to high-net-worth individuals by large financial institutions. How it works:
1. Collateral Assessment: Borrowers pledge their investment portfolios as collateral for the loan. The lender evaluates the portfolio to determine eligible securities and establishes a loan-to-value (LTV) ratio.
2. Loan Amount: The amount available for borrowing is based on LTV. For example, lenders may allow borrowing up to 70% of the value of stocks and more than 90% of certain government securities.
3. Access to Funds: Once the loan is approved, borrowers can access the funds through checks or wire transfers. The loan can be used for almost any purpose.
According to its annual report, JPMorgan has total loans outstanding of $586 billion at the end of 2024. Of which, Banking & Wealth Management accounted for $33B (5.7%).
JPMorgan accepts the following as collateral: Stocks (liquid Large-cap stocks), Bonds (U.S. Treasury securities), Mutual Funds (large mutual funds and ETFs), and Other Securities (Hedge funds, private equity positions, and certain alternative investments).
• In May, JPMorgan started accepting shares of BlackRock’s iShares Bitcoin Trust (IBIT) as loan collateral. IBIT has net asset value of $87.6B as of October 31st.
• By the end of the year, JPMorgan will accept bitcoin (market cap $2.9 trillion) and Ethereum (market cap $463 billion) as collateral for its securities-based lending.
How big is the securities-based lending market overall?
At a 2024 report, the Federal Reserve estimates the total size of securities-based lending from the Top 100 US banks at $138B by Q1 2024.
Private research (Growth Market Reports) estimates that the global securities-backed lending market size reached $540.2B in 2024. The market is currently expanding at a CAGR of 8.7%, with expectations to attain a value of $1,134.9B by 2033.
This growth is fueled by heightened demand for liquidity solutions, the proliferation of wealth management services, and the rising adoption of flexible credit facilities.
In my opinion, the JPMorgan actions will kick off a trend. As financial assets increasingly become tokenized, the demand for Bitcoin and Ethereum will grow exponentially. Securities-based lending is one of the many uses in mainstream financing.
Unlike the Fed, we can’t print new Bitcoin and Ethereum at will. New demands, from 401k and loan collateral alike, could reach hundreds of billions. This will be the catalyst to lift up the digital gold and silver to the next level.
Riding the ride with Micro Bitcoin and ETF Futures
Traders who share the bullish view on Bitcoins and Ethereum could explore CME Micro Bitcoin Futures ( PSE:MBT ) and Micro ETH Futures ( NYSE:MET ).
The MBT contract has a notional value of 0.10 bitcoin, as defined by the CME CF Bitcoin Reference Rate (BRR). On October 31st, the December contract (MBTZ5) is settled at $110,910. Each contract has a notional value of $11,091. To buy or sell one contract, CME Group requires an initial margin of $2,662. By design, this futures contract has a built-in leverage of 4.2-to-1. When bitcoin goes up, futures positions could enhance the return by four times compared to spot bitcoin positions.
MET has a notional value of 0.10 ETH. On October 31st, the December contract (METZ5) is settled at $3,932.5, putting the contract value at $393.25. The initial margin is $126, implying a built-in leverage of 3.1-to-1. When Ethereum goes up, futures positions could enhance the return by three times compared to spot ETH positions.
What happens if Bitcoin or Ethereum drops? For price protection, traders could enter a buy order with a stoploss. For example:
• A long MBTZ5 order at 110,910 with a stoploss of 95,000 limits the maximum loss to $1,591 (= (110910-95000) x 0.1).
• A long METZ5 order at 3,935.5 with a stoploss of 3,500 limits the maximum loss to $43.25 (= (3932.5-3500) x 0.1).
In addition to margin (leverage) and stoploss (loss protection), both Micro Bitcoin and Micro ETH have a daily price limit at 10%. This feature is particularly helpful when the market is panicky. Price Limit or Circuit slows down the irrational price movements until cooler heads prevail.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
