The Chicago Mercantile Exchange (CME) launched its highly anticipated Bitcoin (BTC) options on Monday, with 55 contracts changing hands on the first day alone. An options contract represents a right, but not an obligation, to purchase one Bitcoin futures contract, which represents 5 BTC or approximately US$2.3 million at its current value.
CME is a direct rival of Bakkt, a crypto trading platform launched by the parent company of the New York Stock Exchange, the Intercontinental Exchange (ICE). Bakkt was one of the most anticipated arrivals in the crypto space in 2019, having been touted as an access point for institutional investors to the world of crypto. However, things didn’t go quite to plan for Bakkt, as trading volumes fell well short of expectations, with just 623 contracts being exchanged in the first week of launch.
“Successful options products require a robust, liquid underlying futures market, our CME Bitcoin futures have rapidly evolved over the last two years to become one of the most liquid, listed bitcoin derivatives products in the world, averaging nearly 6,400 contracts (equivalent to 31,850 bitcoin) traded each day in 2019,” Tim McCourt, managing director at CME Group, wrote in a LinkedIn post.
The strong debut of CME’s options contracts coincides with Bitcoin’s best start to a new year since 2012. On Tuesday, the world’s leading cryptocurrency hit a two-month high of US$8,745, rocketing 8% in just under 24 hours. While the considerable interest in the multiple futures products now available to investors likely played a part in those gains, renowned BTC trader Murad Mahmudov said a combination of price, volume, and open interest in the crypto space are likely to signal a further bull run.
However, a single day of trading is not enough to truly gauge the future performance of CME’s options trading, and the first weeks and months will provide a clearer picture of the state of the new Bitcoin options market.
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