Bakkt launches Bitcoin Options and cash settled Bitcoin Futures

  • The exchange Bakkt yesterday launched two new Bitcoin financial products: Bitcoin Options and Bitcoin Futures, which are settled in cash.
  • The products are intended to provide investors with better protection for their invested capital and thus reduce their investment risk.

Bakkt, which is operated by the parent company of the New York Stock Exchange (NYSE), yesterday announced the launch of two new financial products. Bakkt follows the increasing demand of its clients and gives investors more opportunities to hedge their profits and reduce risk.

Bitcoin Options and Cash Settled Bitcoin Futures Contracts

The monthly Bitcoin options are based on the physically covered Bitcoin Futures contracts. They are located in a fully regulated market that is monitored and controlled by the Commidity Futures Trading Commission (CFTC). This gives investors more flexibility.

Bakkt has also introduced cash-settled BTC futures contracts. The Bakkt Bitcoin (USD) Cash Settled Monthly Futures contract is listed on the ICE Futures Singapore and regulated by the Monetary Authority of Singapore (MAS). The contracts are settled with the data from the physically delivered Bakkt Bitcoin Monthly Futures contract from Bakkt.

All contracts are concluded in USD and can be used worldwide without restriction. Lucas Schmeddes, COO of ICE Futures and Cleare Singapore, describes that with this step Bakkt will build on the success already achieved:

Our new cash settled futures contract will offer investors in Asia and around the world a convenient, capital efficient way to gain or hedge exposure in bitcoin markets. Building off the success of our deliverable futures contract, the cash settled futures will leverage ICE’s regulated, globally-accessible market to offer a safe, secure and compliant environment for the trading of Bitcoin.

Bitcoin cash-settled futures contracts are not new in the United States. They were first introduced by the Chicago Mercantile Exchange (CME) in December 2017. Like Bakkt, the CME recently announced that it would launch Bitcoin options based on Bitcoin futures contracts early next year.

According to Bakkt’s official website, the cash settled Bitcoin futures have reached 2:30 p.m. GMT reached a volume of 1250 Bitcoins, starting with a promising volume.

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Bakkt – Curse or blessing for the crypto market?

The physically delivered contracts of Bakkt were unanimously welcomed by the community as a milestone, whereas the cash settled futures are strongly criticized. The monthly expiring Bitcoin futures on the Chicago Mercantile Exchange (CME) are suspected of significantly influencing or manipulating the Bitcoin spot price.

The company Arcane Reserach published a new study in mid-October which confirmed these assumptions. Of the first 20 months in which the CME Bitcoin futures were launched, Bitcoin lost value in 15 out of 20 cases (75 percent) approximately 1.5 days before expiry and the Bitcoin price fell in a row.

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Christopher Giancarlo, former chairman of the U.S. Commodity Futures Trading Commission (CFTC), confirmed the influence of cash-based Bitcoin futures on the cryptocurrency market. Giancarlo explained that the Trump administration has approved the cash-based Bitcoin futures on the CME and Chicago Board Options Exchange (CBOE) to burst the 2017 Bitcoin bubble.

However, it remains to be seen what direct impact the new financial products will have on Bakkt on the cryptocurrency market. Bitcoin’s price at the time of writing was USD 7,351.09 and has been slightly down in the last 24 hours (- 2.09%).

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About Author

Please follow me on Twitter for deep analysis. Collin is a Bitcoin investor of the early hour and a long-time trader in the crypto and forex market. He's fascinated by the complex possibilities of blockchain technology and tries to make matter accessible to everyone. His reports focus on developments about the technology for different cryptocurrencies.

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