Introduction to Bitcoin Options
Bitcoin is like that party friend who shows up uninvited but somehow manages to charm everyone around. Now, thanks to the Chicago Mercantile Exchange (CME) Group, this charming digital overlord is getting a twist in the form of options for its Bitcoin futures contracts. Announced on September 20, and pending regulatory review, this development is set to launch in the first quarter of 2020. So, fasten your seatbelts, folks; it’s going to be a wild ride!
Understanding the New Offerings
The mastermind behind this move, Tim McCourt, the Global Head of Equity Index and Alternative Investment Products at CME Group, emphasizes that this isn’t just a shot in the dark. Recognizing a growing client demand paired with robust expansion in their Bitcoin futures markets, McCourt believes that these options will give clients the much-needed flexibility to trade and hedge their Bitcoin price risk. Imagine it as a safety net at a circus; nobody wants to fall, but it’s good to know it’s there!
How Options Will Benefit Traders
The introduction of options is intended to help institutions and pros manage their Bitcoin exposure and to hedge their futures contracts in a regulated environment. This is like putting your money in a cookie jar with a lock—safer and a little sweeter! With Bitcoin futures having shown impressive metrics since launching back in December 2017, including 20 successful expiration settlements and over 3,300 active accounts, the demand for more secure trading methods is clear.
The Numbers Behind the Hype
Year to date, the figures are staggering. The CME has reported an average of 7,000 Bitcoin contracts traded daily, amounting to about 35,000 BTC. Just when you think you’ve seen it all, the numbers keep climbing. In 2019, traders across diverse asset classes at CME have clocked an average daily volume of 4.3 million. That’s a party you don’t want to miss!
Institutional Interest and Market Trends
It seems the institutional crowd is finally catching on. Earlier in the summer of 2019, the interest in CME Bitcoin futures peaked, with a record high of 56 large open interest holders in July. Institutional momentum appears to be snowballing, reminiscent of those rare occasions when you actually score that last slice of pizza. Earlier this year, CME Bitcoin futures even hit an all-time trading high!
What’s Next? The Role of Bakkt
In parallel developments, Bakkt Warehouse—acting as the qualified custodian for the Bakkt platform—has started accepting customer deposits and withdrawals earlier this month. This means new frontiers for Bitcoin trading, especially as Bakkt is set to introduce physically delivered Bitcoin futures. Unlike CME’s cash-settled futures, this offers traders a more tangible approach to their investments. So, whether you want to be traditional or get your hands on the real deal, the options are out there.
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