Bakkt Set to Beat CME in Bitcoin Options Race as BTC Futures Volume Explodes 800%

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by Wanguba Muriuki · 4 min read
Bakkt Set to Beat CME in Bitcoin Options Race as BTC Futures Volume Explodes 800%
Photo: Pixabay

After Bitcoin futures on the ICE Bakkt platform surged by almost 800% in a day, reports emerged that it is seeking to jump ahead of the CME group to release a Bitcoin options contract.

The Intercontinental Exchange (ICE) in conjunction with their Bitcoin futures platform Bakkt is reportedly seeking to jump ahead of the CME group to release a Bitcoin options contract. This suggests that it wants to beat its CME rival that is considering a Q1 2020 launch for its Bitcoin option contract.

Amsterdam-based Deribit already sells Bitcoin options but they have no standing compared to ICE or CME. Reportedly, BTC options will attract more institutional investors and enhance the cryptocurrencies’ reputation in the financial world. On October 10, the CME Group announced that it is looking into the Ethereum futures contract after CFTC chairman called Ether a “commodity”.

While speaking at the Yahoo! Finance All Markets Summit, Mr. Tarbert stated that he is convinced that ether is not secure. In his strong opening statement, he said that he wants America to lead in the blockchain technology field. He added:

“We’ve been very clear on Bitcoin: Bitcoin is a commodity. We haven’t said anything about ether – until now. It is in my view as chairman of the CFTC that ether is a commodity.”

Now, it appears like it is a battle of the exchanges eyeing the potentially lucrative options contracts. Thus, being first in this market could offer the exchange a competitive edge.

Bakkt Improves After a Shaky Start

The trading volume of Bitcoin futures on the ICE’s Bakkt platform is registered to have surged to 224 contracts on October 9. That represents a 796% increase from the previous day. According to the tracking data compiled by Twitter account Bakkt Volume Bot (@BakktBot), these 224 contracts represent an all-time high for the platform.

This data comes in amidst a sigh of relief from the investors who were skeptical about the sustenance of the Bakkt platform after a shaky start. As we highlighted earlier, the first-week performance of Bakkt’s Bitcoin futures was disappointing after the platform saw very lukewarm response from investors.

The Bakkt Volume Bot’s data shows that the daily traded volumes of Bakkt’s Bitcoin monthly futures contracts surged from 25 to 224 in a day. This increased volume was followed by a significant increase in BTC price from roughly $8,200 to $8,600.

On September 23, Bakkt’s much-anticipated contracts settled in physical Bitcoin went live. Bakkt’s initial underwhelming volumes were immediately compared to the fiat-settled BTC futures on CME. Binance Research suggested that Bakkt’s dismal performance in its early days was responsible for the price of Bitcoin dropping rapidly from near $10,000 to under $8,000.

Why Bakkt Volume Increased Rapidly?

This impressive performance could have some connection with the increase in Bitcoin’s spot price. On October 9, BTC surged to a 2-week high crashing the major resistance at $8,500. That marked one of the biggest single-day price increases in over a month. Traders are desperate for recovery since BTC plunged into a doom-ridden downward spiral that took it below $8,000.

The major dip in September was sarcastically blamed on the Bakkts pitiful launch performance. At that time, eToro’s Mati Greenspan said:

“The main catalyst seems to be the underwhelming volumes of Bakkt’s Bitcoin debut on Wall Street. Traders have been buying this rumor heavily for months and it seems that they’ve now sold the news.”

Now it seems the roles have reversed with Bitcoin firmly driving and Bakkt enjoying the smooth ride. Whether things will continue as they are now, only time will tell. Currently, Bakkt’s performance seems to rely heavily on positive BTC market performance. Thus, if Bitcoin taking a volatile turn downwards, Bakkt may follow suit and dive too.

CME Gets Lukewarm Interest

In the meantime, the CVE Group, Bakkt’s main competitor in Bitcoin futures, received dwindling interest. That could be as a result of BTC’s price drop which CME can blame on Bakkt.

Before Bakkt’s launch, CME was growing exponentially even aiming to double their open position limit. The day before BTC dropped to under $8,000, CME registered a monthly high of 14340 contracts. Just a day later, that dropped by 42% with just 8,181 contracts traded.

Skew Markets reported that open interest for CME’s Bitcoin futures contracts has shrunk by 50% in the last quarter. In July, open interest stood in the region of $350 million but has since declined citing a 50% retrace to a valuation of just $150 million.

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