Bitcoin prices have exploded vehemently over the past month recently touching its new all-time record high of $8100. A lot of factors during this time have contributed to the volatility and the rising momentum in Bitcoin prices.
One of the major announcements, which triggered the upswing, was the introduction of Bitcoin Futures Contract by the CME group which will launch during the second week of December. Such a huge participation from one of the world’s largest derivate marketplace instills a new level of confidence within investor community.
In addition to the CME Group, other major financial institutions from Wall Street have turned optimistic about the future of Bitcoin. In yet another big-leap, LedgerX has initiated the first-ever long-term Bitcoin futures ‘option’ pegged at a price of $10000.
LedgerX calls this ‘option’ the Long-Term Equity Anticipation Securities (LEAPS) which is quite a popular options contract in the market. This public traded options contract holds an expiration of a year and longer. Due to its extended expiration period, the premium is usually placed at a higher price which gives the option contract enough time to mature.
For Bitcoin the option contract is set to expire next year on December 28th, 2018. As said, the price of the contract is pegged almost 30% higher at $10,000 over its existing price of $8029.40 as per CoinMarketCap.com. LedgerX has put some very interesting terms for the contract, according to which the buyer will purchase Bitcoin for a so-called ‘strike price’ of $10000 on that date.
If the price of Bitcoin is higher than $10000 on the date of expiry, the buyer gets to purchase Bitcoins at the strike price i.e. $10,000. However, if the price of Bitcoin is less than $10,000, the buyer will pay $2250.25 to the seller. The good thing about this contract is that unlike future swaps, the buyer is not obligated to purchase the asset.
Such an option contract by LedgerX is expected to bring more cash flow and liquidity to the Bitcoin market reflecting the level of confidence investors have in this cryptocurrency. Moreover, the one-year long-term expiry of the contract will bring more maturity and stability. It is also likely to ensure higher participation of institutional investors within this space.
LedgerX CEO Paul Chau is quite optimistic about this new option contract more specifically because of the growing confidence in the cryptocurrency from the side of Bitcoin investors. He believes this to be the first step which could pave the future dynamics of Bitcoin in 2018 and further in years to come.
Last month LedgerX exchange had undergone a soft launch where it traded over $1 million Bitcoins in swaps and options. After the successful test, CEO Paul Chou wrote:
“We ended up completing swaps and options trades worth over $1,000,000 USD. Crucially, these trades were cleared through LedgerX, which is the only institutional grade, US federally regulated exchange and clearinghouse for digital currencies. And we are literally just getting started.”
According to the website LedgerX is the first federally regulated exchange and clearinghouse to list and clear fully-collateralized, physically-settled bitcoin swaps and options for the institutional market.