CME Group Prepares the Launch of Bitcoin Options in 2020
Creating the framework for setting up cryptocurrency-based financial instruments has proven quite difficult due to regulatory resistance. However, things are slowly changing since nowadays institutional investors already have access to Bitcoin futures, thanks to the efforts of the Chicago Mercantile Exchange, also known as the CME Group.
Despite this aspect, a market crash followed soon after the release of the Bitcoin futures. As such, digital currency analysts throughout the world are trying to predict what will happen to the bitcoin price once the CME Group launches their upcoming Bitcoin options trading instrument. To put this into perspective, in the case of traditional futures contacts, holders are obliged to sell the contract in question once it expires. On the other hand, option-based futures contracts do not entail this obligation, thus making it easier for investors to adjust their risk rates. Naturally, this can lead to gains or losses according to market conditions.
Recent reports indicate that the CME Group, which is considered as one of the world’s biggest marketplace for derivatives, is currently gearing up for the January 2020 launch of their Bitcoin options on the BTC futures contracts already offered. This launch will only happen if regulatory approval is received in the United States.
In a recent press statement, Tim McCourt, the group’s Head of Equity Index and Alternative Investment Products, mentioned that: “Since the launch of our Bitcoin futures, clients have expressed a growing interest in options as another way to hedge and trade in these markets. We have worked closely with clients and the industry to establish a robust and increasingly liquid underlying futures market here at CME Group, and we believe bitcoin options will now offer our customers greater precision and flexibility to manage their risk.”
While the crypto bubble may have burst following the release of bitcoin futures, it is important to keep in mind that the futures market has actually grown considerably since its initial launch. At this point in time, the CME Group has a trading volume of approximately 32,500BTC per day, which is certainly impressive. Roughly 50% of this volume originates from within the US, meaning that foreign investors are also highly interested in crypto-based derivative products.
In terms of how these options will influence crypto prices, it is relevant to point out that most analysts have reached a form of consensus on the matter. As such, the bubble initially burst due to past hysteria and lack of maturity on the crypto market scene. These factors aren’t present today, which is why many people believe that CME’s bitcoin options will lead to price increases if used by investors.