Since tumbling as low as $6,657 in mid-December, Bitcoin has been gathering momentum. After a weekend of consolidation, BTC is currently trading north of $8,100.
Several factors may be behind the distinct upward turn. These include the upcoming Bitcoin halving, strained geopolitical tensions adding to Bitcoin’s “safe haven asset” narrative, and the Bitcoin hash rate reaching an all-time high.
There’s also been growing action in the Bitcoin futures market. The Intercontinental Exchange’s Bakkt platform launched for institutional investors in September of last year.
While demand for its physically settled BTC futures product has been slow, the company added options in December and continues to see increased demand.
CME options are launching today
Today (January 13) marks another milestone in terms of products available for institutional investors as CME options contracts are set to go live.
— CMEGroup (@CMEGroup) January 8, 2020
The response to Bakkt’s options has been muted. However, global markets company CME Group is a much larger and more established market player.
Managing director Nikolaos Panigirtzoglou said that over the last few days, “There has been a steep increase in the activity of the underlying CME futures contract”.
He also noted that open interest has increased by a massive 69% from year-end. The number of large open-interest holders has also grown.
“This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”
How will this affect BTC price?
Whether the launch of CME options will be bullish for Bitcoin’s price remains to be seen. In fact, thus far, the introduction of futures products in the market has typically driven BTC price downward.
When CME and the Chicago Board Options Exchange (CBOE) launched their cash-settled BTC futures products at the end of 2017, BTC price took a memorable and notable nosedive from its high of nearly $20,000 (which it has yet to recover from).
Moreover, some have claimed that Bakkt’s underwhelming September launch was the reason behind another BTC price collapse. It’s possible that the CME options product will not have any immediate effect on Bitcoin’s price.
As a cash-settled product, investors do not have to take delivery of the crypto-asset, meaning that demand for BTC will not increase as investors simply speculate on its price and receive their winnings or losings in cash.
However, the more products added for institutional investors to enter the asset class, the better. Despite slow demand, the infrastructure is being built.
CME expanding its offering to investors is a bullish sign that demand may be increasing for investing in BTC at last.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.