The Intercontinental Exchange has just announced its first block trade of the newly offered Bakkt bitcoin monthly options contracts submitted to ICE Futures US.
First Block Bitcoin Options Trade
According to the announcement the Bakkt Bitcoin Options settle into the underlying BTC monthly futures contract two days prior to expiry. Galaxy Digital Trading and XBTO executed the inaugural trade. A block trade is defined as a privately negotiated trade with a certain minimum size threshold.
The primary difference between futures and options is that the contract holder is obligated to sell a futures contract on the expiry date. With options there is no obligation to sell the contract on expiry, giving greater flexibility which may impact market prices.
The report added that price discovery is completely regulated and has no exposure to unregulated bitcoin spot markets which can vary greatly from exchange to exchange during times of peak volatility.
President of ICE Futures US, Trabue Bland, stated;
“Based on our benchmark physically delivered bitcoin futures, these options contracts offer our customers a capital-efficient new tool for trading and for managing volatility, price risk and income generation,”
Head of Trading Strategy at Galaxy Digital Trading, Josh Lim, added;
“We believe the development of the institutional market infrastructure leads to deeper liquidity in digital assets. The advent of centrally-cleared bitcoin options on a regulated U.S. exchange is a major milestone for this market.”
While Paul Eisma, Head of Trading at XBTO, continued;
“By launching bitcoin options at a major board of trade, ICE and Bakkt are providing invaluable instruments that professional investors and commercial hedgers need in order to properly manage risk in a rapidly maturing asset class. XBTO supports the evolving growth in non-linear institutional trading products coming to digital asset markets.”
Earlier this month the Chicago Mercantile Exchange detailed its BTC options contracts which are due for launch on January 13.
Institutional investment products such as these were previously viewed as bullish for the industry but sentiment towards them has turned sour in recent months.
The crypto community has widely criticized the futures contracts which now allow big players to short the asset which will have a knock-on effect on BTC markets. The latest offering in Singapore offers cash-settled contracts that do no favors whatsoever for bitcoin.
Since the first launch of BTC futures back in December 2017 the price of the underlying asset has plummeted 65%.
Are institutional futures/options products good for bitcoin? Add your thoughts below.
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