Daily Trending News and Market Sentiment: Bitwise ETF Rejection, CME Options Coming

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Almost literally in the same hour we published yesterday’s analysis, Bitcoin price made a surprise run for the top, gaining 5% in the space of one hour and ensuring the past 24 hours has been a mini bull run for crypto.

Since picking up from under USD 8,200, price has hovered around USD 8,500 for almost 20 hours now, although now with Central Europe afternoon trading, some profit taking appears to be taking a chunk of price. But at USD 8,473 now at 2:15 pm London time (CoinDesk), there won’t be too many traders complaining about this momentum.

The altcoin surge that took place yesterday prior to Bitcoin’s rise has somewhat faded now. The USD 200 run for Ether, and XRP’s attempt to break 30 cents both did not take place, and these coins are now showing red charts as the majority of alt gainers yesterday are now losing their gains to profit taking across the board.

It would appear that the bad news from yet another round of Bitcoin exchange traded fund (ETF) rejections by the US Securities and Exchange Commission (SEC) is not affecting this minor market recovery right now. Bitwise Asset Management was the latest victim of the SEC this time, when its ETF proposal filed in conjunction with NYSE Arca was said to have not met the necessary requirements to prevent market manipulation and illicit activities.

It is the same general answer given by the SEC in all its other Bitcoin ETF application rejections, so the news was hardly of any surprise to onlookers, which would probably explain why there was virtually no visible impact on price action. Bitcoin is now seemingly impervious to any bad news in that line of thought, although now that the market is so used to ETF rejections, one does wonder what might take place should an ETF actually gain approval from the SEC. Alex Kruger, crypto analyst, certainly believes that any and all rejections thus far has already been priced in by the market.

Then again, given the poor start to supposedly much-anticipated Bakkt futures, could it be that if a Bitcoin ETF were to get approved, a failure to gain traction would also result in selling pressure and a lack of confidence in the world’s most traded digital asset?

We reported yesterday that the US Federal Reserve had decided to expand its balance sheet yet again, and this measure — while not quantitative easing according to the Fed — is now credited to have pushed this current rally.

But Bitcoin derivatives are certainly not going away, and it may not matter yet to traders on whether options and futures for Bitcoin are cash settled or physically settled. The fact is, there already are enough derivatives options for Bitcoin.

CME Group, for example, which already runs a cash-settled Bitcoin futures, now expects its options to hit it off with traders and crypto miners in Asia. Global head of equity index and alternative investment products at CME, Tim McCourt, told the South China Morning Post (SCMP) that the exchange notes that Bitcoin futures make up the majority of demand (over half of trading volume) from traders based in Asia and Europe. But they now hope options contracts will be just as popular.

McCourt explained why:

“While futures give you a one-for-one exposure, whereby the movement of the underlying bitcoin translates directly to a specific dollar value per contract, an option gives you varying strike-price levels and can give you either downside protection, or upside exposure at a fraction of the underlying [assets’s] price.”

CME expects that the new product will launch in the first quarter of 2020. It is expected that eveb miners based in China will now consider Bitcoin options to consider a more accurate way to hedge the cost of their Bitcoin operations. According to McCourt, some miners there already are hedging with futures.

In the past year, an average of about BTC 35,000 (currently over USD 300 million) in bitcoin futures contracts are traded on CME each day. said he expects bitcoin options will enable miners of the cryptocurrency to more accurately hedge the cost of their production. Today, some miners who have operations in China are already using bitcoin futures contracts to hedge.

Now that CME is the only provider of such futures, it does appear that they will expand their dominance in the derivatives market now when options also becomes available. These aren’t physically settled with actual Bitcoin, however, so their impact on actual price does not appear to be likely.

 

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