- CME options on futures launch with huge volumes
- Options on Bitcoin futures push the price higher
- Institutional investment shows significant growth
CME Bitcoin Futures Options Go Live
The CME Group, an organized exchange company offering options, futures, and a number of other products, launched options on Bitcoin futures contracts this week. The contracts, quoted in U.S. dollars, represent five Bitcoins and are cleared centrally to avoid counterparty risk. In order to accurately track Bitcoin’s price, CME uses data on trades from a number of the larger cryptocurrency exchanges.
While Bitcoin derivatives have been available since 2014, many of these products were not reliable or regulated. The introduction of CME’s cash-settled Bitcoin futures in 2017 ushered in a new wave of legitimacy for the cryptocurrency and helped to bring in institutional players. The launch of its options on Bitcoin futures takes this progress one step further.
Volumes of CME options erupted following their launch, surpassing its competitor Bakkt. FTX, a Binance-backed derivatives platform, also just announced its own Bitcoin options contracts signaling a push for Bitcoin derivatives.
Previously, low volumes and price volatility made it seem as if there was little to no excitement for Bitcoin derivatives. Following the launch of Bakkt’s futures contracts, the Bitcoin price dropped nearly $2,000. After CME’s launch of its new Bitcoin contracts, the price of Bitcoin rose over $600.
Nikolaos Panigirtzoglou, JPMorgan’s managing director for global market strategy, noted that, "This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.” Data from CME showed that open interest in Bitcoin futures had increased 69% from the year-end, hitting a seven-month high.
Institutional Bitcoin Investment Booming
While the enthusiasm in Bitcoin derivatives is showing growth, so is interest in other Bitcoin investments. Grayscale Investments, the biggest Bitcoin trust provider, allows its clients to put money into investment vehicles that provide exposure to Bitcoin. This lets investors take part in the Bitcoin market without actually holding the cryptocurrency.
Grayscale said it took in $608 million last year, which surpassed the previous six years combined. 71% of the investments were made by institutional investors like hedge funds showing that there is institutional interest in Bitcoin and that it is growing.
Managing director of Grayscale, Michael Sonnenshein, said that, “It’s clear that we’re experiencing institutional adoption. The asset class is experiencing increased validation from legacy companies like Fidelity and CME, signaling to institutions and the investment community as a whole that crypto as an asset class is here to stay.”
Grayscale expanded its investor base by approximately 24% in 2019, while Bitcoin’s price almost doubled and vastly out-paced traditional investments like securities and commodities.
The combination of new Bitcoin derivatives being introduced to the market with institutional interest has helped push Bitcoin, as well as other altcoins, higher in the new year. The overall market capitalization prior to the launch of CME’s Bitcoin futures options was around $216,000,000,000. Currently, the overall market capitalization sits at around $240,000,000,000.
One Year Returns
- Bitcoin's return in the past year is 157.06%. This is a 36.69% increase from last week's 114.90%.
- Bitcoin Cash has a one year return of 142.68%. This is an 88.98% increase from last week's 75.50% one-year return.
- XRP's one year return is -28.26% and has increased 26.63% since last week's one-year return of -38.52%.
- Ethereum's return in the past year is 38.61%. Ethereum's one year return has risen 365.18% since last week's return of 8.30%.
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