Bitcoin Options May Bring More Institutional Investors - JPMorgan

Cornelia Mascio
Gennaio 14, 2020

At the end of 2017, the CME launched Bitcoin futures contracts on its world-renowned derivatives exchange, opening up the cryptocurrency market to a swath of new investors, namely institutions and other large investors that couldn't hedge their bets in this market as well before the launch.

It was reported last month that Bakkt and its New York Stock Exchange parent, Intercontinental Exchange Inc., started offering options.

According to the report, CME is dominating in trading Bitcoin Futures on regulated exchanges, which could serve as the game-changer in the long run.

In the past few days, "there has been a step increase in the activity of the underlying CME futures contract" as the open interest on CME futures contracts has increased 69% from year-end.

Indeed, one simple chart suggests that the strong growth in the contracts' open interest metric means the price of BTC will soon explode higher.

As reported, CME Group is adding bitcoin options based on its existing bitcoin futures contracts. Bitcoin, over the past few weeks, has seen its price, volume, and open interest increase all at once, showing effectively no signs of weakness.

Currently, BTC/USD is trading at $8,165 with 24 hours gains of 2.27%, as per Coincodex.

Separately, Bitcoin's intrinsic value has been rising, but remains below the market price following a significant divergence in the middle of previous year, the report said.

JP Morgan calculated the inherent value of Bitcoin by valuing it as a commodity and looking at the marginal cost of production, including the computational mining power that it takes and the electrical energy it consumes.

The market price of bitcoin has declined by nearly 40% from its peak, while the intrinsic value has increased by around 10%, strategists said.

The market price has declined by almost 40% from its peak while the intrinsic value has risen by around 10%.the gap has not yet fully closed, suggesting some downside risk remains.

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