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CME Finally Launches Bitcoin (BTC) Options. Will Crypto Market Be Affected by New Product?

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Mon, 13/01/2020 - 17:43
CME Finally Launches Bitcoin (BTC) Options. Will Crypto Market Be Affected by New Product?
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CME Group, a Chicago-based futures exchange, has announced that its Bitcoin options are now trading live. It states that the much-awaited launch of the new product was trading by "customer demand." The newly launched contracts can be traded on CME Globex and CME Clearport. 

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Regulated Bitcoin options 

Option, as the name suggests, is a contract that allows traders to buy or sell the underlying asset at a certain strike date. As U.Today reported, ICE subsidiary Bakkt launched options on futures contracts on Dec. 9, becoming the first company to get approval from the Commodity Futures Trading Commission (CFTC). Now, Bakkt will have to compete with its major rival in this department. The rollout of CME's BTC options contracts was highly anticipated by JPMorgan

Even though CME Group and Bakkt are the two major forces on the regulated crypto derivatives market, the options trading is currently dominated by Deribit. Crypto analytics boutique Skew determined that the derivatives exchange, which recently decided to move to Panama due to regulatory pressure, is responsible for 80 percent of all BTC options volume.  

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A double-edged sword 

The potential impact of the CME options on the crypto market remains uncertain. While they could potentially revive the waning interest of institutional investors in Bitcoin, it could negatively affect the spot price of the leading cryptocurrency. The CFTC allegedly rushed to approve CME's Bitcoin futures to put an end to the great Bitcoin rally in December 2017. The BTC price plunged shortly after their launch that took place on Dec. 17, 2017. 

Meltem Demirors of CoinShares also opined that the popularization of futures could diminish the impact of the upcoming Bitcoin halving because speculators choose to trade derivatives instead of the actual asset. 

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