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- The Chicago Mercantile Exchange (CME) has already on the first day significantly exceeded the trading volume of Bitcoin Options of Bakkt since December 09.
- According to CFTC Chairman Heath Tarbert, the Futures contribute to the legitimacy of the Bitcoin market.
The Chicago Mercantile Exchange (CME) launched its highly anticipated Bitcoin options on the BTC futures yesterday, Monday. The launch could hardly have been more successful. The largest competitor Bakkt was already put in its place on day one.
While the reported volume of the CME on its Bitcoin options was already USD 2.19 million on the first day, Bakkt has traded USD 1.15 million since its launch on December 9. On the first day, 55 Bitcoin Options contracts, five Bitcoin (BTC) each, were traded on the CME.
Looks like 55 contracts went through on CME's BTC Options first day of trading, approx. $2.3mln notional.
100% were Calls.
Source: CME (preliminary estimates) pic.twitter.com/M7StLOApom
— skew (@skewdotcom) January 13, 2020
Bitcoin derivatives market soaring
The successful launch of Bitcoin options at the CME reflects the currently strongly increasing interest in Bitcoin derivatives. Bitcoin options have shown a strong start to 2019, according to data from Skew, on almost all exchanges. Last week, daily volume rose to over $90 million, with Deribit currently by far the most popular exchange for BTC options. Currently, Deribit accounts for over 80% of the total volume.
Non-institutional traders still seem to prefer unregulated exchanges like Deribit and OKex over regulated exchanges like the CME and Bakkt. But the interest of institutional traders also seems to be growing. In a note on Friday, Nikolaos Panigirtzoglou, JPMorgan’s managing director for global market strategy, explained that institutional investors are preparing for the introduction of BTC options on the CME.
According to the Bloomberg article, open interest in Bitcoin futures has increased by 69 percent since year-end, reaching a seven-month high. Panigirtzoglou continues:
This unusually high level of activity in recent days probably reflects the high expectations of market participants in options contracts.
In the past, the Bitcoin derivatives market has had varying effects on the BTC spot price. The bull run to the all-time high of USD 20,000 in the run-up to the launch of the first regulated, cash settled Bitcoin futures on the CME is unforgettable. However, many investors will also remember the massive drop in prices following the release of the CME Bitcoin Futures and the subsequent protracted bear market.
Currently the demand for Bitcoin derivatives seems to be driving the Bitcoin price. As CNF reported, the Bitcoin price could rise to over USD 8,500 in the last few hours.
Higher legitimacy through Bitcoin derivatives
The launch of the CME Bitcoin options could further legitimize the Bitcoin and crypto market. The CME relies on trade flow data from several major Bitcoin exchanges to calculate its price data. This fact could be a bonus for the US Securities and Exchange Commission (SEC), which has always referred to an “immature” and “manipulated” market in its rejections of various Bitcoin ETF applications.
Heath Tarbert, Chairman of the U.S. Commodity Futures Trading Commission (CFTC), recently discussed this issue in an interview with Cheddar. According to Tarbert, the futures market enables people to buy Bitcoin or Ethereum reliably:
By allowing them to come into the world of the CFTC, we’re allowing the futures market to develop based on these products and in that way, when people are interested in purchasing a particular digital asset of the two, Bitcoin or Ether, they can rely on the futures market.
The Chairman also explained that the futures market helps in pricing, hedging and risk management, adding that he believes it helps to legitimize and increase the liquidity of these markets.
And so, in many ways, it is helping to legitimize, in my view, and add liquidity to these markets.
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