Tag: bitcoin futures

Intercontinental Exchange Bakkt Bitcoin Futures Trading Platform Goes Live

Launched as of 8 pm EST on Sept. 22, Bakkt’s physically settled Bitcoin futures trading has launched and is now live for on the Intercontinental Exchange (ICE). The product was designed to remake Bitcoin as a mainstream investment for the world’s investment managers.

ICE Futures US, one of the world’s largest commodities markets is now offering Bakkt Daily and Monthly Bitcoin Futures, the first physically settled cryptocurrency contracts traded on a federally regulated exchange.

Endowment funds or brokerage firms that trade contracts will be able to channel their payments and acquire a guarantee that their Bitcoin will be delivered through the ICE clearinghouse that settles other commodities contracts with the launch of Bakkt futures.

After thirteen months of deliberation from the regulators and multiple delays, Bakkt announced on Aug. 16 of 2019, the platform has gained approval from the US Commodity Futures Trading Commission (CFTC) and announced that trading would be available starting today. Bakkt’s Bitcoin Warehouse has been accepting withdrawals and deposits in September and is now processing the daily and monthly trading of the Bitcoin futures.

Bakkt’s physically settled Bitcoin futures could allow clients to get Bitcoin rather than fiat currency in its equivalent value once the contract expires, compared to the Bitcoin futures trading options that the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) offer.

The launch of Bakkt’s platform has been highly anticipated as many speculators believe that the product is a leap forward for the growing adoption and acceptance of Bitcoin and the crypto market in general. Crypto analyst Thomas Lee tweeted on Sept. 19, mentioning: 

“I am very positive on Bakkt and its ability to improve trust with institutions to crypto.” 

Kelly Loeffler, Bakkt’s CEO, stated: 

“The funds that trade on our exchanges expressed to us that they don’t want to deal in today’s unregulated markets, and want end-to-end federal oversight, on the level of the NYSE, to feel safe trading in Bitcoin.”

CME Group also announced that it would offer options on its Bitcoin futures contracts starting in the first quarter of 2020, at the same time as CBOE. In a recent announcement, CME iterated that the launch of Bitcoin options is aimed to provide clients with “additional tools for precision hedging and trading.” 

The Faces Behind the Billion Dollar Bitcoin Futures Market

The Bitcoin (BTC) futures market has exploded like no one could have expected over recent years and it continues to grow. This summer, BitMEX hit a new all-time record for BTC futures trading at over $16 billion. CME recently petitioned the CFTC to double its BTC futures trading capacity in the face of soaring interest. Binance has entered the space, and Bakkt has launched with its physically delivered BTC futures product (albeit somewhat tepidly). 

In the light of so much action, let’s take a look at some of the key faces working to build the billion-dollar BTC futures market. 

1. Arthur Hayes

Love him or hate him (there are very few people who stand in the middle) co-founder and CEO of BitMEX is arguably the most powerful man in the BTC futures space right now. His exchange is widely recognized as the most liquid in the market and frequently turns over billions of dollars a day in trading volume.

With his company registered in Seychelles and offering 100x leverage, BitMEX has democratized the BTC futures space like no other. It’s made a lot of people a lot of money–and also left plenty of novice traders REKT. Hayes has made a few enemies along the way with globally-renowned anti-Bitcoin economist Nouriel Roubini labeling him a criminal with an unregulated exchange).

That doesn’t take away from the fact that he’s a brilliant mind that has come from nothing to build the most popular BTC futures exchange currently available for retail traders. With a degree in economics from the Wharton School of Business and trading derivates in Hong Kong for many years, he’s used his extensive knowledge to make BitMEX the number one platform it is.

2. Kelly Loeffler

Even though it’s only been out for a month, it feels as if the CEO of New York Stock Market’s Bakkt, Kelly Loeffler, has been part of the fabric of the BTC futures market for a while now. That’s because she has. Bakkt first announced its plans to enter the market with the first physically settled BTC futures contracts back in the summer of 2018. However, it has suffered various delays and setbacks from U.S. regulators.

Despite that, and although Bakkt’s debut failed to cause the stir that was expected, many people consider its physically settled BTC futures product to be revolutionary as it will (when they’re ready) force investors to purchase or take delivery of the actual underlying asset for the first time.

Moreover, it seems as if traction is finally growing for Bakkt, as it saw its record day on Friday trading futures contracts at over 1,100 BTC.

Despite Kelly being key in ushering in a new era of futures products, she’s also a woman. And with so few women in blockchain, it’s refreshing to see a female making such an essential contribution to the BTC futures market.

3. Changpeng Zhou (CZ)

Changpeng Zhou (CZ) really needs no introduction. If you haven’t heard of CZ by now, you probably haven’t heard of Bitcoin or cryptocurrency either. As CEO and founder of the world’s most popular cryptocurrency exchange Binance, the company that shook the crypto world, only recently entered the crypto derivatives space. But they already hit a massive $150 million in 24-hour trading on their beta platform–and then surpassed the 24-hour trading volume of its spot markets earlier this month.

More importantly than that, Chinese-Canadian coder CZ’s got personality in bucketloads and are often leading and influencing debates going on in the crypto space. He’s also on the Forbes billionaire’s listwith a real-time net worth of $1.2 billion.

4. Terry Duffy

As chairman and CEO of the Chicago Mercantile Exchange Group (CME), you would think that the man at the helm of one of the highest-profile BTC futures trading products would be a little more bullish on Bitcoin. Despite smashing trading volume records and his competitors CBOE into submission, Terry Duffy doesn’t see Bitcoin as having a long-term future.

He toldBusiness Insider at the FIA’s International Futures Industry Conference in Florida earlier this year that he only saw fiat-backed digital currencies as staying the distance. He also believes that there is too much speculation in the space and not enough use cases (ironic, given the nature of his business).

Still, that was before the recent talks with the CFTC, and while Bakkt’s launch date was still somewhat blurry. Perhaps, Terry’s outlook has changed since then. 

5. Jesse Powell

Co-founder and CEO of one of the industry’s longest-running cryptocurrency exchanges, Kraken, Jesse Powell, is an influential figure in the industry. He’s also a pretty decent guy and one of the first to offer assistance in high-profile exchange hacks. Kraken is well-known for refusing to give in to regulatory bullying too, negating to comply with a New York inquiryfor customer information.

Not wishing to be left out of the BTC futures space, Kraken purchasedUK-based Crypto Facilities derivatives trading firm earlier this year. The move made Kraken the first crypto exchange for offering spot trading and futures trading (although not to U.S. customers).

6. Adam Todd

Pertaining to another impressive BTC futures platform that is yet to launch, there are few people in this industry who haven’t heard of Adam Todd or seen his legendary viral videos. After a couple of highly public delays and developer fall outs, Adam has teamed up with developers SmartDec to get his industry-first commission-free futures exchange over the line.

Another of crypto’s controversial figures, the Digitex Futures CEO, is bringing something arguably even more unique to the BTC futures space with zero-fee trading. With the testnet launch coming up on 30 Nov on the Ethereum mainnet, soon active short-term traders will be able to trade BTC futures contracts aggressively and pursue scalping strategies that simply aren’t possible on the fee-charging exchange models currently available.

Wrapping it up

There are plenty more faces behind the billion-dollar BTC futures market with more and more exchanges throwing their hats into the ring all the time. From established players like OKEx and Bitfinex to newer entrants like Derebit and Idax, a lot of money is changing hands daily in this burgeoning industry. With new developments afoot with physically-settled BTC futures contracts and commission-free trading, there’s plenty to keep your eye on in the derivatives space.

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LedgerX Co-Founders Put on Leave Following US CFTC Scrutiny

Ledger Holdings, Inc., the parent company of LedgerX, feels pressure from the United States Commodity Futures Trading Commission (CFTC) after it has been reported that LedgerX physically settled Bitcoin futures products have not been approved. 

The CFTC continues to push for regulation and full approval before any crypto company wishes to offer commodities trading to US Citizens sparking what many believe could be seen as major problems for Ledger Holdings, Inc..

In July Ledger began to offer the trading services on its platform which has led to many in the CFTC commenting that this is not certified and should be. 

Ledger X Co-Founders Paul and Juthica Chou have been placed on administrative leave effective immediately. Larry Thompson is appointed as the interim CEO and lead director of Ledger Holdings who has over 30 years of wall street experience.  The reason for the personnel change remains unclear. 

With board changes and regulatory scrutiny from the CFTC, it is expected that Thompson needs to step up and negotiate the best next steps for Ledger.

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JPMorgan Reveals Market is Highly Anticipating the Launch of CME Bitcoin Options

According to JPMorgan Chase & Co, Institutional interest in Bitcoin-related contracts appears to be building, and they believe the market is in high anticipation of the CME Group Inc. options, which are to be launched on Jan. 13.Recently we have seen institutions such as Bakkt, subsidiary of the New York Stock Exchange and its parent Intercontinental Exchange Inc., start offering options last month but according to strategist Nikolaos Panigirtzoglou in a note on Jan 10., volumes and open interest haven’t met the expected mark. However he expects with the dominance of CME in trading Bitcoin futures on regulated exchanges, this new offering may change things, as reported by Bloomberg.

“There has been a step increase in the activity of the underlying CME futures contract.” Panigirtzoglou had noted in his writing that open interest had seen a 69% increase from the end of the year and that the number of large interest holders had increased. “This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”

The price of Bitcoin has always caused the price movement of Bitcoin to have a mixed reaction. There were times it had appeared to have dragged, such as when ICE announced the debut of its new futures contracts in September. And the price climaxed to $19000 in December 2017 following the launch of the futures for CME and Cboe Global Markets Inc.

The price of Bitcoin saw a 2.1% increase to $8,209.42 as of 11 a.m. in Hong Kong, according to Bitstamp pricing: this was near its highest levels since mid-November. According to the report, the intrinsic value of Bitcoin has been on the increase but remains below the market price. JPMorgan calculates the intrinsic value of Bitcoin by treating it as a commodity, considerations such as the marginal cost of production, the computational power and the cost of electricity used are key elements.

Panigirtzoglou stated in his writing, “The market price has declined by nearly 40% from its peak while the intrinsic value has risen by around 10%,”. But that “the gap has not yet fully closed, suggesting some downside risk remains.”

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Bakkt BTC Options Trading Falls To Zero: What Does This Mean for Mainstream Adoption?

When the Intercontinental Exchange (ICE) announced its plans to launch the Bakkt Bitcoin physically settled futures trading platform, many believed it would act as the trigger for mass institutional adoption of cryptocurrency.

Yet the platform has so far failed to show any signs of being the catalyst for the mainstream and here we are at the start of a new year and trading volumes on Bakkt for options on Bitcoin futures contracts have effectively fallen to zero.

As the majority of cryptocurrencies have been in a bullish state since the start of the year, what does the lack of the regulated and institutional platform’s BTC options mean for the market?

Ten Days with No Options

Popular analytics firm Skew posted a tweet on Tuesday, highlighting that Bakkt had not recorded any trading on Bitcoin options on its platform for ten straight days. This figure is supported by ICE’s own website which also records zero trades from Jan 20 – Jan 24. In fact, it would appear that the last trade was 20 bitcoins which occurred on Jan 17.

Bakkt’s options futures have so far performed poorly at best and they were soundly outmatched by the unregulated exchange Deribit in their opening week.  

Are the Institutions Ready?

The impetus behind Bakkt was to create a safe and regulated environment where larger institutions, corporation, and investors would feel comfortable leveraging for access to the nascent crypto market.

The trading volume or lack thereof seems to indicate that these larger investors are still weary of cryptocurrency. While it would be over eager to expect mass adoption right now, the slow build is a little slower than most would have expected. 

Although the platform is not currently being heavily utilized, the fact that it exists and has the backing of ICE—which also owns the New York Stock Exchange—is a significant step in bringing Bitcoin and cryptocurrency to the mainstream. At least when the big boys finally come to play, there will already be a venue ready for them.

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Bitcoin Analyst: Bitcoin Futures Do Not Manipulate Bitcoin Price In Spot Market

According to a Bitcoin analyst, PlanB, creator of one of the most accurate Bitcoin price models, on April 7, 2020, claimed that Bitcoin Futures do not affect the price of Bitcoin in the spot market. In his tweet, he said that Bitcoin prices stayed within the S2F bands even when Bitcoin was at its all-time-high (ATH) in December 2017 which many people claim was suppressed by the introduction of Bitcoin Futures in Chicago Mercantile Exchange (CME) in 2017. 

He went on to say that Bitcoin performed as expected even after the Bitcoin Futures had hit the market in 2017. The reason to clear the air and the link between Bitcoin and Bitcoin Futures is because many people in the crypto community have started speculating a pattern in the Bitcoin price drops which is coinciding with the settlement dates of Bitcoin Futures. 

“Absolutely! Real Bitcoin is something completely different than paper bitcoin. Real bitcoin is a bearer asset that can be used as collateral (e.g. for borrowing), paper bitcoin is an IOU like debt and your bank account (it’s yours until it isn’t,” said PlanB. 

According to PlanB, the Bitcoin price is a function of the interaction between the miners who pump in the ‘new’ bitcoin in the system and the already circulating Bitcoins in the market. He made a model on the basis of this function and it has been extremely efficient. However, the model still faces criticism from many industry experts. 

One of the twitter users, Josh Kernan, cited a research report from the Federal Reserve Bank of San Francisco which claimed a direct connection between Bitcoin price and the Bitcoin Futures. 

But PlanB was quick to respond that the study is now irrelevant as the data used in the report was of just 5 months. The report was published on May 7, 2018, soon after which the Bitcoin Futures market went into contango and is staying there ever since.  

  

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Bloomberg Predicts Bitcoin Price to Surge Past $20,000 in 2020, Doubling Last Year’s High

Bloomberg predicted in its recent report that Bitcoin’s price in 2020 could reach double of last year’s high of $14,000.

It further suggested that adoption is the primary Bitcoin metric, and Bloomberg takes a positive outlook on this end.

Looking at the trend during the previous Bitcoin halving event in 2016, the cryptocurrency seems to be mirroring the same trend and returning to its previous peak. 

Bitcoin’s price has seen a 60% decline in 2014, and at the end of 2016, Bitcoin matched the peak in 2013. If Bitcoin chooses to follow the same trend as 2016, with a 75% decline in 2018, Bitcoin is headed towards $20,000, according to Bloomberg.

According to the report, institutional investors such as Grayscale, also known as GBTC has been consuming around 25% of the new supply. 

Progressing towards the digital equivalent of gold 

The coronavirus pandemic has been pushing Bitcoin’s maturity, says the report. Based on volatility readings, Bitcoin is gaining the upper hand, against the stock market. Bitcoin’s 260-day volatility measure is the lowest ever compared to the stock gauge.

As Bitcoin’s volatility is at its lowest-ever against crude oil, this indicates that the cryptocurrency is joining the mainstream and progressing towards the digital equivalent of gold. The graph below shows Bitcoin’s volatility is around 2x the Nasdaq. When Bitcoin’s price and index first crossed paths in 2017, it was closer to 7x.

Source: Bloomberg

In Bloomberg’s Crypto Outlook April 2020 report, Bitcoin’s transformation into a safe haven asset like gold was said to have been accelerated by the coronavirus disruption. Taking into account that Bitcoin’s on-chain indicators are remaining price supportive, the report reveals that the coronavirus appears to be accelerating Bitcoin’s performance much more than the broad cryptocurrency market. 

Futures driving Bitcoin’s future

Bitcoin futures trading on the CME has seen favorable trends and are supportive of the price, according to Bloomberg. Increasing futures open interest and the stead price premium will reduce volatility even further and will drive the Bitcoin price up.

As Bitcoin was given the golden ticket has Bitcoin futures were being traded on a US-regulated exchange, while the Securities and Exchange Commission (SEC) on the other hand was reluctant to approve Bitcoin exchange-traded futures (ETFs).

COVID-19 may give Libra life

COVID-19 has highlighted vulnerabilities in the fiat world, and markets have been built on outdated technology. As the Fed is considering a digital dollar, Facebook’s Libra gets a bit of the spotlight, as Wells Fargo, Truist and U.S. Bank are looking for new tech upgrades. 

The Libra Association recently welcomed Singapore’s state investor, Temasek Holdings. Temasek as a portfolio value of 313 billion Singapore dollars (roughly $219 billion), making it one of the more prominent backers of Libra.

 

OKEx Adds Ether Options to Help Crypto Traders Exploit Market Volatility

Cryptocurrency exchange OKEx announced that it is adding two new services to its platform. The Malta-based exchange launched its Ether (ETH) options contracts on June 4. The exchange also announced that it will launch the EOS/USD options on June 18. 

The company also stated that they have placed 1000 Ether in the Ether options insurance funds to prevent any possible clawback. The exchange is one of the largest cryptocurrency trading and derivative platforms.

Options act as a trading risk hedge

OKEx is giving crypto users more options to wager on the movement of digital assets. The two additions to the crypto exchange will allow traders to either sell or buy the underlying assets to hedge risks and maximize profits.

OKEx has managed to make a name for itself and cultivate its position in the derivatives market, offering various derivatives products like crypto futures and perpetual swaps for Bitcoin (BTC) and ETH. The crypto exchange has positioned itself as the Bitcoin futures exchange since March. The company said that such derivatives products play an irreplaceable role in maximizing profits and hedging risks.

For example, the firm explained that when the price of Ether goes down, spot traders can choose to close or hold their positions to cut losses. With Ether options, traders can choose to purchase put options and profit from declining prices to offset their losses in the spot market while holding Ether for potential future gains.

The company said that the marked prices for the contracts are determined by OKEx’s Black-Scholes model that works on real-time market data analysis. But the final settlement prices are determined by a time-weighted average of what the asset price is over a certain period of time that will occur before the contract expires.

Open contracts allow traders to sell and buy depending on the type of contract and the underlying asset, be it Ethereum or Bitcoin helps traders to hedge against risks.  Investors’ interest in the cryptocurrency derivatives market has risen during this year, with open interest in Ether futures listed in major exchanges increasing by 100%.

Before the company launched the ETH/USD options, it has already introduced BTC/USD options, which have demonstrated to be a hit among crypto traders. Skew released recent data that indicates that OKEx’s BTC/USD options generated an average daily transaction volume of more than $10 million.

Derivatives products assist in hedging risks during difficult times and maximizing profits. Among several derivatives products, futures and options are the most popular ones.

OKEx is currently the largest Ether futures exchange by open interest, constituting 26% ($179 million) of the global tally of $672 million. Furthermore, recently the exchange has surpassed BitMEX to become the largest Bitcoin futures market share.

Although OKEx dominates the future products, Deribit crypto exchange dominates the options segment. However, OKEx has a lot to cover before threatening Deribit’s number one position in the options market.

OKEx makes entry into Africa

OKB is a global digital coin (token) adopted by OKEx. The boom of blockchain technology has led to the emergence of a new financial system identified as decentralized finance (DeFi). It is known that DeFi benefits people with low-cost financial services with higher reliability and efficiency. 

OKEx continues working together with various partners to let OKB users access various DeFi services. In September 2019, OKEx announced its plans to enter its presence in Africa’s market. The exchange targets Africa because the continent has seen a rising mass adoption of cryptocurrencies and blockchain-related activities.

Binance Unveils Bitcoin Quarterly Futures

As Bitcoin (BTC) continues to prove a point as a viable investment asset class, much promise rallies around its future value. The price of Bitcoin has refused to break its $10,000 resistance point since its third halving. It has however been projected to experience a massive bull run soon. As this expectation deepens, cryptocurrency exchange Binance is set to launch Bitcoin Quarterly Futures in addition to its suite of derivative products.

Bitcoin Futures and Binance Offering

Bitcoin futures allow investors to gain exposure to Bitcoin without actually having to hold the underlying Bitcoin. Bitcoin Futures comes in the form of a Futures Contract, similar to the Future Contract for a Stock Index. With Bitcoin Futures, investors can speculate on the future price of Bitcoin and get money back in return upon settlement of the contract.

The Bitcoin futures can be modeled to span different durations ranging from a month to 12 months or more. While the Chicago Mercantile Exchange (CME) offers a monthly Bitcoin Future contract, the Binance offering will span three months. The Binance team confirmed the Bitcoin Futures has a leverage up to 125x and will be available on the Binance Web Futures web trading interface.

The Binance Bitcoin Futures Contract will be settled in Bitcoin and complemented with competitive taker fees of 0.020%. The contract will be settled on the last Friday of the corresponding three month period.

Implication for Investors

Bitcoin Futures investment is a risky venture but can offer a good alternative to the existing investment opportunities available for Bitcoin. Blockchain.news reported increased growth in CME’s Bitcoin Futures portfolio and this indicates the growing acceptance of Bitcoin Futures as a BTC investment alternative. With the Bitcoin Quarterly Futures, Binance customers which number in their millions now have access to Bitcoin Futures Trading on the platform they have come to trust.

A Billion Dollars in Bitcoin Options Expired, Bitcoin may be Vulnerable to Violent Price Moves

A billion dollars worth of Bitcoin options are to expire in June, in the meantime, traders are debating whether this will result in higher volatility, and the direction of which Bitcoin price is headed. Traders must decide whether to take their options or leave.

Around 114,000 options from Bitcoin’s regulated and unregulated derivatives markets are set to expire, traders will need to decide whether to sell, buy, or to cast aside the options they have previously made to trade Bitcoin.

Bitcoin options, similar to other traditional options markets, is a derivative which allows the traders to purchase an asset at a pre-specified price at a later date, giving traders the opportunity to “place a bet” on the asset.

Bitcoin options recorded a strong start for 2020. Deribit, an unregulated Bitcoin derivatives exchange has seen a rise in popularity this year, as it holds $1.2 billion in Bitcoin options contracts. On January 13, CME launched Bitcoin options on its derivatives exchange. On that day CME traded around 55 contracts worth around $2.1 million of Bitcoin, while Bakkt peaked at $1.15 million in Bitcoin option trading volume. Despite the hype of these new regulated exchanges, Deribit still managed to dominate 80% of the trading volume.

CME exchange, the next biggest holder in Bitcoin options currently has $441 million in outstanding options trades, according to derivatives research firm Skew.

The expiry of options may influence market direction heading towards the Bitcoin bull or bear market during a process known as “pinning,” where options traders try to move the spot price to avoid huge losses. Currently, open interest is concentrated at $10,000 and $11,000 strike prices, at which the price levels traders buy. Strike prices expire a few months after the trader places the bet.

According to CFTC data in May, CME Group Bitcoin futures saw a record number of large open interest holders this week, at 66. Long open interest from hedge funds trading Bitcoin futures also high an eight-month high, reaching over $15 million on May 5.

What happens after the Bitcoin options expire?

If traders rollover short positions in June contracts to July and September, Bitcoin may see high volatility in prices in the coming months. A rollover means buying an underlying asset and taking the opposite position in the same contract, nearing the expiry date, and replicating the same strategy in the next closest expiry.

Bitcoin has seen a prolonged period of low volatility in the past few months, which means it could mean a high possibility of a big move in either direction. While many may not find volatility in Bitcoin price exciting, it has a positive impact on option prices; as traders usually sell options when volatility is above its lifetime average, and purchase options when volatility is low. 

Although the Bitcoin options market only takes up 1% of total futures and swap volumes, there is a substantial open interest of 4,605 contracts in CME futures worth $214 million at press time expiring in June; which is yet to be seen to be rolled over to July. 

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