The Bakkt exchange has launched its newest product, options on Bitcoin (BTC) futures. The derivative product offers a new way to get exposed to the risk of BTC price fluctuations, based on the futures market.
The fully regulated Bitcoin options launch together with cash-settled futures, another product of the ICE.
The Bakkt options offer a market that is completely removed from the BTC spot market, with a new price discovery mechanism.
“Price discovery occurs completely within a federally regulated market and has no exposure to unregulated bitcoin spot markets. The Bakkt Bitcoin Options offer important hedging, trading and income generating opportunities to market participants around the world,” explained Adam White, COO at Bakkt.
Options offer the right, but not the obligation to buy a product at a certain price. For Bakkt, the prevailing model of settling is to roll over the contract, with few reports of physical delivery.
The Bakkt BTC futures exchange has been criticized for not sharing its BTC addresses, and so far its wallets are unknown. Futures trading also reveals that taking physical delivery is mostly unpopular. Still, Bakkt speculation shows that BTC is of interest to investors, but their interferences has prevented the spot market from reaching a higher price range.
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The Bakkt exchange still carries significant volumes, though on slower BTC days, futures trading immediately slows down.
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Until recently, the only BTC options were unregulated and highly risky, usually offered as binary options on relatively unknown brokerages.
The BTC spot price drove down on Tuesday, reaching $3,353.79, as both Bakkt and CME futures showed lower volumes. Spot markets increased activity to about $18 billion in 24 hours.
Options markets may become a trend in 2020, as crypto-to-crypto exchanges also start offering the products. OKEx plans to offer its options product by the eng of the year, while CME will start its options market on January 13.
