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Will Bakkt’s Bitcoin Options Change the Cryptocurrency Industry?

Summary:
To refresh our memory, Bakkt, which is backed by New York Stock Exchange (NYSE) and the Intercontinental Exchange (ICE), recently in late September launched its long-awaited Bitcoin Futures platform, where investors and traders can physically exchange Bitcoin. Now, after the exchange has hit new record volumes, Bakkt announced that they will be offering Bitcoin options by December 9, 2019. “Options allow investors and traders to do different things, and will facilitate new and important approaches to investing,” commented Matt Hougan, director of research at Bitwise Asset Management.These Bakkt Bitcoin options contracts are going to be similar to European style contracts which means that they can only be executed on the date of expiration. Matt Hougan believes that Bakkt has done this in

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To refresh our memory, Bakkt, which is backed by New York Stock Exchange (NYSE) and the Intercontinental Exchange (ICE), recently in late September launched its long-awaited Bitcoin Futures platform, where investors and traders can physically exchange Bitcoin. Now, after the exchange has hit new record volumes, Bakkt announced that they will be offering Bitcoin options by December 9, 2019. 

“Options allow investors and traders to do different things, and will facilitate new and important approaches to investing,” commented Matt Hougan, director of research at Bitwise Asset Management.

These Bakkt Bitcoin options contracts are going to be similar to European style contracts which means that they can only be executed on the date of expiration. Matt Hougan believes that Bakkt has done this in order to align the expiration of the Options contracts with the expiration of its monthly futures contracts.

However, it all isn’t “fine and dandy” so to say, as Bakkt enters the market with two “industry firsts”, and experts point out that that isn’t necessarily going to lead to success. It can also go down unnoticed, but that is very unlikely to happen.

Moreover, Bakkt is set to compete with the Chicago Mercantile Exchange (CME) which also plans to launch Bitcoin options contracts next year. As Bakkt is the setting stone of physically settled Bitcoin futures and now plans to offer Bitcoin options to its clients, experts remind us of a recent event in the past that could be similar to this.

Hence, back in 2017, Chicago Board Options Exchange (CBOE) beat CME in the race of “industry-first” to launch Bitcoin Futures. CBOE managed to be the first to launch it, however, this wasn’t your typical success story. Earlier this year, CBOE was forced to close their Bitcoin futures platform due to low volume.

On the other hand, CME is becoming only stronger and will also introduce its Bitcoin options contracts next year.

That is the thing. We can also bear in mind that the industry has ever since matured and we have been through a pretty rough crypto winter, and only now are slowly recovering. You could even say that now we are recovering with the help of Bakkt, but that’s only subjective.

Ultimately, it is believed that by launching the Bitcoin options market, Bakkt will open the gates for even more institutional investors as Bakkt has advertised itself as an “end-to-end regulated platform”. Also, this move would facilitate cryptocurrency regulation in the world and could possibly change the cryptocurrency industry.

“As with everything, I expect that it will take some time for volumes in the options space to grow,” said Hougan. 

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