Cryptocurrency Derivatives Series: Bitcoin Hovering Above $8k Mark As CME To Lead Maturing Crypto-Derivatives Markets

We have witnessed constructive developments in the cryptocurrency derivatives market,

CME has come up with the Bitcoin futures which are cash settled. Various OTC players like Binance, BitMEX & OKEx, are well equipped in crypto-derivatives markets with perpetual swap derivatives products. While FTX is lined up for options trading facility for Bitcoin (BTC). Yesterday, the CEO of FTX, Sam Bankman-Fried announced that options were listed on their trading platform.

Amidst such developments, we have noted the gradual maturing of the cryptocurrency space as the influence of institutional investors has grown in the aftermath of the listing of bitcoin futures since Dec 2017. Indeed, a few months ago we noted that the true level of institutional participation was likely greater than widely used trading volume figures implied, as a number of sources suggested.

But CME is no far from this race, they have also scheduled to unveil the options trading mechanism for bitcoin, likely to commence from January 13, 2020.

The new cryptocurrency start-up, Bakkt established by the Intercontinental Exchange (ICE), has already launched bitcoin options, futures contracts with physical delivery as well as cash-settled facilities.

Since CME is set to roll out regulated options on bitcoin futures, it represents the growth of the listed options market. The contracts that are settled into futures, carries luring factors for the new investors to the market. This brings in a hedging mechanism for miners ahead of the bitcoin block subsidy halving. As a result, huge turbulence in the underlying bitcoin price would be expected.

While the institutional industry players have begun speculating on CME’s launching news & perceived as a constructive driving force, the top-notch executives of JPMorgan Chase reckon that CME Group would be the frontrunner in the bitcoin futures contracts arena.

Hence, we are positioned with the prudent longs in CME BTC Futures of January deliveries in our previous write-up on both hedging and trading grounds for targets up to $8,500 level (advocated when spot reference: $7,305). The underlying price of bitcoin (BTCUSD at Coinbase) has reclaimed up to $8.4k levels in the recent past, we squared-off these trade positions by booking profits. During such bullish price action, one can easily make out that there’s been huge volumes and open interests in CME January contracts (refer above chart).

Currently, the pair is trading at $8,070 levels. On hedging grounds, maintain the same longs as we could foresee further upside risks. Courtesy: CME