Bitcoin options, the next battlefield of the exchange?

Since 2009, Bitcoin has been born for more than a decade. Bitcoin has gone through decades of financial development in a very short period of time, and its financial trading market pattern has been rapidly fissing.

Initially, Bitcoin only had over-the-counter trading, and later on-the-spot transactions began to rise. At the end of 2017, the Bitcoin futures contract launched by the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) made the Bitcoin derivatives market prosper.

This year, the entry of Bakkt, LedgerX, ErisX and other exchanges has brought a new competitive landscape to the Bitcoin contract market. Bitcoin futures with physical delivery have become mainstream. At present, Bakkt has successfully launched bitcoin physical delivery futures, and Bakkt was once regarded by the market as “the biggest bullishness in 2019” and “bull engine”, which will bring mainstream funds and start a new round of journey.

However, derivatives providers led by CME, Bakkt, and LedgerX are not satisfied with this. They are still exploring the huge unknown potential of the bitcoin market, and collectively turn their attention to the bitcoin option market. The war is almost fixed, and the smoke is about to begin to pervade. .

Although Bitcoin options products have been in the market for some time, when CME and Bakkt are considered to be “bull engine” institutions, they will actually detonate the bitcoin options market and let the Bitcoin derivatives market re-enter prosperity.

CME, Bakkt's bitcoin options or soon to meet in the market

On September 23 this year, Bakkt, a bitcoin futures platform of the Intercontinental Exchange (ICE), officially launched the Bitcoin (BTC) futures trading platform with physical settlement. Although the transaction volume is not satisfactory, the market is more tolerant and thinks that Bakkt The impact may change from a trickle to a torrent.

However, less than a month after the launch of Bitcoin physical delivery futures, Bakkt seems to have the next move.

Several sources familiar with the Intercontinental Exchange product roadmap revealed that Bakkt is considering launching a derivative related to the bitcoin market. Bakkt hopes to enter the Bitcoin options business, which hopes to beat rival Chicago Mercantile Exchange (CME).

CME has had news out there a few days ago and will launch Bitcoin options. CME Group appears to be preparing to add another product to its Bitcoin derivatives line. Later, Bloomberg reported that CME will launch bitcoin options in the first quarter of 2020 and is currently awaiting review by regulators.

If everything goes well, CME's Bitcoin options will be available to the market in a few months. According to the South China Morning Post, CME executive Tim McCourt said recently that Asian investors and miners are expected to have huge demand for their upcoming bitcoin options. In recent times, the trading volume of Bitcoin futures contracts has soared, which will pave the way for greater success in other derivatives.

In addition, the US compliant cryptocurrency exchange LedgerX has launched Bitcoin options, and ErisX (supported by US securities giant TD Ameritrade), which has been licensed by the US CFTC Derivatives Clearing Organization (DCO), may also Keep up with the pace of large institutions and enter the options market.

Recently, the latest quarterly report of the CoinGecko cryptocurrency market showed that cryptocurrency derivatives ushered in explosive growth , rising from six in early July this year to 17 in early October. Among them, Bitmex, Coin Security, OKEx, Kraken, Fire Coin, and BitFlyer are representative platforms. And, despite the bearishness of the third quarter, the derivatives exchanges performed strongly, with significant trading volume peaks recorded during price volatility (end of September).

LedgerX has launched bitcoin call options

As early as November 2017, LedgerX launched its first long-term trading of Bitcoin Futures Options (LEAPS), priced at $10,000. In July of this year, LedgerX announced its call option again, priced at $100,000, and buyers bet that bitcoin prices would exceed $100,000 by December 2020. For a long time, this long-term futures option has been regarded by the industry as one of the signs of industry maturity, and to some extent can pave the way for more institutional funds.

In the past two years, LedgerX has been providing derivatives to institutional clients, and today the company has been approved by the US Commodity Futures Trading Commission (CFTC) to provide retail investors with new products, and options are one of its attempts. In August of this year, LedgerX announced on official Twitter that they are doing retail transactions on Omni! Bitcoin spot and options trading is now open to everyone.

Different from CME and Bakkt, LedgerX's option products are available first, but their futures products are twists and turns, and have not yet been launched.

Recently, Cointelegraph reported that the head of LedgerX said that their Omni platform only has options and swap products, and there is no bitcoin futures. LedgerX Chief Operating Officer Juthica Chou said, “We have been in close contact with CFTC. We now have three licenses, one that allows us to list options and swaps, and one that allows us to list options, swaps and futures. (Designated contract market), and a DCO license that allows us to liquidate options and swaps. We are waiting for the DCO amendment, and when we get the DCO amendment, LedgerX will increase futures.

OKEx options are under development, and Coin's acquisition of digital currency derivatives trading platform JEX

Not only are traditional exchanges eyeing the bitcoin options market, but the original cryptocurrency exchanges also seem to be keenly aware of the new winds in the market.

Today, Xu Kun, vice president of OK Strategy, said on Weibo that the derivative market space in the traditional financial market is more than ten times that of the spot market. Like the digital currency, the future derivative space is very high. Currently, the contract market share is OKEx and bitmex are almost equally divided. In the world, it is right for the friends to enter the derivatives market, but the road is also tortuous. We have accumulated more than 6 years of professional and experience to support our road more stable, and the options are currently under development.

Compared with CME and Bakkt, the pace of OK seems to be faster, and its options products are already under development.

In addition, on September 3 this year, the company announced the acquisition of JEX, a digital currency derivatives trading platform. JEX will join the currency safety ecosystem as Binance JEX to further build the crypto asset derivatives market and provide professional services including derivative contracts and options for the currency security users.

What is a Bitcoin option? What is the difference with Bitcoin futures?

Options and futures are derivatives contracts, which give the holder the right to buy or sell an asset at a fixed price at any given date or any time before that date; futures contracts are a relative spot Transaction time across time.

Futures trading is still a certain kind of object (can be goods / goods, such as gold, crude oil, agricultural products, can also be financial instruments, but also bitcoin), but not immediately trading, but trading in the future agreed time; The option trading is a right to buy and sell, but investors do not have the obligation to buy or sell.

SwissBorg Wealth Management generalizes Bitcoin options, just as you think Bitcoin prices will rise in the future and buy Bitcoin (or think that prices will fall and sell Bitcoin), Bitcoin options still offer price changes Arbitrage opportunities. But the option does not have to actually buy (or sell) bitcoin, but instead provides the investor with the "right" to buy (or sell) bitcoin at a pre-defined price in the future.

In addition, trading options are usually cheaper than spot trading, especially for bitcoin transactions; options allow investors to trade different contract combinations, thus avoiding downside risks.

It can be seen that the nature of futures options is different, but the trading methods of the two are similar.

Bitcoin options are available in a variety of classifications, the main categories being bitcoin call options and bitcoin put options. There are many retail investors in the industry who are playing Bitcoin futures contracts, but the probability of a bitcoin contract being caught in a bad position is not small. The coin-based JEX platform believes that BTC call options have three major advantages: limited losses, unlimited returns, fast rises, slow declines, and super-leverages that do not break positions.

In addition, from the validity period of the Bitcoin option contract, there are weekly bitcoin options (in weeks) and monthly bitcoin options (in months). From the perspective of exercise rights, it is divided into European bitcoin options (which can be exercised on the exercise date), and American bitcoin options (which can be exercised at any time before expiration).

In addition, the main benefits of futures options are also highly similar, such as:

1. Bringing a large amount of emerging funds and flows to the cryptocurrency market to provide more liquidity for the bitcoin trading market.

2. Providing a federally regulated and compliant system for institutional and retail investors to purchase Bitcoin, providing institutional investors with a stable and secure access to the cryptocurrency market.

3. Bakkt, CME, and LedgerX are all trusted entities. They have high credit, or have traditional authoritative financial endorsements, hold relevant licenses, and are highly secure and legal.

Source: Shallot blockchain

Author: Long Yue, please indicate the source.