Bakkt Looks to Launch New Product
So far, Bakkt’s Bitcoin (BTC) futures haven’t been faring all too well by many standards. That’s not to say the upstart has been doing bad, rather, the cryptocurrency community had extremely high expectations for Bakkt, citing that it is backed by players like the New York Stock Exchange’s parent, Microsoft, and Starbucks.
Bakkt isn’t giving up though. Far from.
Announced in a blog post published on Thursday morning, the American upstart exchange is looking to launch options — financial vehicles/instruments that give buyers a right to buy or sell an underlying asset, often a commodity or stock, at an agreed-upon price on a certain date — for its Bitcoin (BTC) markets. The planned launch date of the company’s next vehicle is December 9th — just around six weeks away.
“We’re committed to bringing trust and utility to digital assets and the options contract is an example of the many products we’re developing for regulated markets,” the company wrote regarding the planned launch.
The Bakkt Bitcoin Options contract will be based on the benchmark Bakkt Monthly Bitcoin Futures contract and represents another important step in developing this asset class for institutional investors https://t.co/4ZE0LIBJJP
— Bakkt (@Bakkt) October 24, 2019
Per the announcement, this new options contract will be “based on the benchmark Bakkt Monthly Bitcoin Futures”, and is a product that “represents another important step in developing this asset class for institutional investors, their customers and investors.” Indeed, the update blog went on to cite the options contract’s potential to allow for a number of investment opportunities: “[the product is designed] to hedge or gain bitcoin exposure, generate income, and offer cost and capital efficiencies.”
Bakkt claims that the product has been self-certified by the Intercontinental Exchange, parent of the NYSE, with the CFTC, meaning that it is a regulated and institutional-grade product.
The company lists the following as some “key features” of the options:
- Capital efficiency
- Cash or physical settlement
- Attractive fees
- Block trades
Bakkt’s announcement comes after the CME, the leader in regulated Bitcoin futures at the moment, revealed that it is looking to unveil an options market in Q1 of 2020.
What Are Bitcoin Options For?
According to a report from the South China Morning Post, Bitcoin options, at least those from the CME, are likely going to be a well-received product from the get-go.
Tim McCourt, CME Group’s global head of equity products and alternative investments, told the outlet that he expects for miners of Bitcoin to pick up the product, citing the ability to better hedge the cost of production via the market. “Today, some miners who have operations in China are already using bitcoin futures contracts to hedge,” the SCMP wrote.
Jeff Dorman, CIO of Arca, has said that new products could allow for new Bitcoin trading strategies, and potentially more institutional involvement through that:
Today, some miners who have operations in China are already using bitcoin futures contracts to hedge.
Photo by M. B. M. on Unsplash