The battle of the bitcoin futures platforms is heating up. The Chicago Mercantile Exchange has released details of its new BTC options contracts while the launch of Bakkt’s equivalent product is less than a week away. How will bitcoin prices react?
More Institutional Bitcoin Products
This time two years ago the CME was poised to launch its game-changing bitcoin futures contracts. It was the first time investors were able to short the digital asset and they did it spectacularly.
Since then it has been widely reported that the US government purposely fast-tracked the offerings in order to burst the BTC bubble. It worked; Bitcoin hit its all-time high the day after the launch and tanked over 80% the following year.
Fast forward two years and the scene is completely different. Markets have settled somewhat and institutional investors have a lot more to choose from if they want to dabble in a bit of bitcoin. The CME has just detailed its BTC options contracts which are due for launch on January 13.
The primary difference between futures and options is that the contract holder is obligated to sell a futures contract on the expiry date. With options there is no obligation to sell the contract on expiry according to Investopedia, giving greater flexibility which of course may impact market prices.
The contract size will be one BTC and they will be offered on a monthly basis. According to the details they will also be physically delivered meaning investors will receive bitcoin on contract expiry. If Bakkt products are anything to go by, traders will not be favoring this option.
— I am Nomad (@IamNomad) December 2, 2019
Comments were all bearish as many expect a huge dump as investors start shorting again. This may not be the case though. When CME first launched its futures, Bitcoin was approaching the peak of a parabolic pump so shorting it was the only logical option. This time around it has been in a six-month downtrend so there may be more in favor of long options.
Bakkt Will be There First
On Monday next week, Bakkt will launch its own bitcoin options contracts, beating the CME by a month. According to the announcement in October the Bakkt Bitcoin Options contract will be based on the benchmark Bakkt Monthly Bitcoin Futures contract.
After a slow start, the Bakkt futures contracts are beginning to build momentum and are posting regular record levels of trading.
Two months after their debut, Bakkt Bitcoin Futures reached a record high of 4,443 contracts traded today – up over 60% from our last record-setting day
We look forward to building on this momentum as we approach the launch of the Bakkt Bitcoin Options contracts on Dec 9th
— Bakkt (@Bakkt) November 27, 2019
As was the case when these hit the markets, it is unlikely that bitcoin will get any upward momentum in terms of price action. Market sentiment is overwhelmingly bearish at the moment and this is unlikely to be altered by any BTC options launches.
Will Bakkt options contracts boost bitcoin prices? Add your comments below.
Images via Bitcoinist Media Library, Twitter: @IamNomad, @Bakkt
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