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Will Bakkt Bitcoin Options Help or Hurt Bitcoin's Price?
Following Bitcoin Futures, Bakkt is Launching Bitcoin Options
Bitcoin has been a bit of a wild ride recently. The original cryptocurrency has been experiencing a bit of a decline price-wise since the summer. Bitcoin went from a yearly high of $13,000 on June 10th to current lows of $7,500 where it is currently trading. While it is important to note that Bitcoin's price is far from its yearly low of $3,400 in January.
Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE) have launched Bakkt Bitcoin Futures. It is an institutional Bitcoin Futures market on Wall Street.
We have previously theorized that Bakkt Bitcoin Futures have influenced Bitcoin's price negatively, but it appears that Bakkt is here to stay. In a recent announcement, Bakkt have revealed that they plan on launching Bitcoin Options.
Bakkt Bitcoin Options
Bitcoin Futures had a bit of a rocky start. It has been criticized for having a very low trading volume on launch. Despite a rough launch, Bitcoin Future's trading volume has slowly been increasing since.
It is possible that Bitcoin Options will experience a similar launch.
As per their announcement, Bakkt Bitcoin Options will have a variety of features. This includes:
· Capital efficiency: Margined contracts, and cross-margining with the underlying futures contract
· Cash or physical settlement: Options will settle into Bakkt's monthly bitcoin futures contract with time to roll, close out positions or take physical delivery
· European style option: This contract design avoids early exercise and reduces operational burdens
· Attractive fees: $1.25 per options contract (1 contract = 1 bitcoin) starting in January 2020, following the fee waiver in December 2019
· Broad distribution and liquidity: ICE Futures U.S. markets are accessible globally and have dedicated market makers to support liquidity
· Instant Messaging: Collaborate with other market participants using ICE Chat, which can be tailored to support your compliance requirements
· Block trades: Access more trading opportunities as block trades by leveraging ICE Block
· Options analytics: Use ICE Option Analytics to support options valuation, analysis and risk management
Bitcoin Options Possible Outcome
While this is speculation, Bitcoin Futures could have a massive impact on the market.
The most plausible outcome is that we will see a large increase in Bitcoin trading volumes. Another plausible outcome is that Bitcoin Options will serve as an opposite of sorts to Bitcoin Futures.
While Bitcoin Futures has been seen by some as a stabilizing force for Bitcoin, Bitcoin Options could increase volatility. Should many traders hypothetically place 'Call' options (speculating that Bitcoin will rise) it could push Bitcoin's price up and vice versa.
One should keep in mind that most anticipated that Bitcoin Futures would push Bitcoin to higher highs before launch. For better or worse, that never came to fruition.