The war between Bitcoin futures platforms is heating up. Less than a week after Bakkt launched the Bitcoin options contract, the Chicago Mercantile Exchange (CME) also announced details of its new Bitcoin options contract. How will Bitcoin price react?
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More Bitcoin products for institutions
At this time two years ago, CME was about to launch a historic Bitcoin futures contract. This is the first time that investors have been able to short this digital asset, and they have been very successful.
Since then, there have been numerous reports that the US government intends to speed up the launch of futures products to squeeze the bitcoin bubble. It worked, bitcoin hit a record high the day after the futures product went live, and plummeted by more than 80% the following year.
Two years later, the situation is completely different. The market has stabilized, and institutional investors have more options if they want to get involved in the Bitcoin space. Currently, CME just announced the details of its Bitcoin option contract scheduled for January 13, 2020.
The main difference between futures and options is whether the contract holder is obliged to sell the futures contract on the expiration date. According to Investopedia, when options expire, investors do not have the obligation to sell, which gives options more flexibility, which of course may affect market prices.
The contract size is 1 BTC and is settled monthly. According to the details, these bitcoins will also be delivered in kind, which means that investors will receive bitcoins when the contract expires. If based on the development history of Bakkt products, traders will not be inclined to this option product.
All comments are generally bearish, as many expect bitcoin prices to fall sharply as investors begin to short again. But this may not be the case. When CME first introduced Bitcoin futures, Bitcoin was approaching the top of the market's parabolic curve, so shorting Bitcoin was the only reasonable option. This time, it is already in a 6-month downtrend, so more people may be inclined to long options.
Bakkt will be the first to launch bitcoin options products
Next Monday, Bakkt will launch its own Bitcoin options contract, a month ahead of CME. According to an announcement in October, the Bakkt Bitcoin option contract will be based on the benchmark Bakkt Bitcoin monthly futures contract.
After experiencing a slow start, Bakkt futures contracts began to exert force, and the trading volume was constantly refreshed. Bakkt tweeted:
"Two months after the launch, Bakkt Bitcoin Futures hit a record high of 4,443 contracts today, an increase of more than 60% from the previous record trading day. With the launch of the Bakkt Bitcoin Option Contract on December 9, We look forward to new heights in this momentum. "
When these factors impact the market, it is unlikely that Bitcoin's price movements will gain any upward momentum. The current market sentiment is extremely pessimistic, which is unlikely to be changed by any bitcoin options product.