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CME Slays Bakkt, Institutional Investors Betting on the Bitcoin Price Going Up

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  • CME beats Bakkt’s bitcoin options over a month of volume on its launch day
  • Bitcoin futures volume and open interest on Monday were also much higher than Bakkt’s
  • With Bakkt, OKEx, FTX and now CME entering the BTC options market, the dominant force Deribit is facing stiff competition

Regulated derivatives exchange CME Group launched its bitcoin option on Monday with a bang and beats Intercontinental Exchange’s Bakkt in the process.

As per the CME Group website, it traded 55 contracts worth about 275 BTC (1 BTC contract equals 5 BTC) or $2.3 million approximately. 100% of these were calls meaning the institutional investors are betting on BTC price rising in the future.

CME’s rival Bakkt that rolled out its bitcoin options on December 9 has since traded just about $1 million.

Binance backed FTX was also a successful launch that reported the volume of $1 million in just two hours of its bitcoin options launch.

When it comes to Bitcoin futures volume on Monday, while CME saw 3,520 BTC in volume and 4,949 BTC in open interest, Bakkt recorded 2,307 BTC in volume and just over 1,100 BTC in open interest.

What are Options anyway?

A type of derivatives product, options are just another way to hedge, leverage or produce income. There are two types of options, calls, and puts. While calls give you the right, not the obligation to buy an asset at a future data, puts are the reverse. Here, by right means, a buyer can exercise it or let the call expire. As for obligation, the seller must honor the buyer’s decision.

The trader explains options in detail via an example where a call option with a price of $10k is expiring on Dec. 24, 2020. The buyer of the call has the right to buy on the date for $10k while the seller of the call has the obligation to sell his BTC at $10k, if the buyer wants to exercise his right on Dec. 24, 2020. As trader and investor Ceteris Paribus explain in a Twitter thread,

In the bitcoin options space, Deribit is the dominant force. But with Bakkt, OKEx, FTX and now CME entering the market, the competition is heating up.

The crypto derivatives exchange Deribit meanwhile, is selling 10% of its equity to Three Arrows Capital and QCP Capital, according to The Block. These investors, in turn, are seeking additional investors to split this 10% equity.

Back in April, last year popular crypto derivatives exchange BitMEX CEO Arthur Hayes also said that in the next 12 to 18 months, the platform could also launch options. At that time, he said, they have some university professors who are working on “a complicated new way of doing this.”

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