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Bakkt: Baiting Institutional Investors with Bitcoin Options Contract

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Bakkt, a collaboration of Intercontinental Exchange (ICE), Microsoft and Starbucks, launched the highly anticipated Bitcoin warehouse and futures contract platform on 23 September. After a slow start and an aim to attract more institutional participation in the crypto industry, Bakkt has now announced that it will soon be launching a regulated options contract for Bitcoin futures.

As per a medium post from the Bitcoin futures exchange, Bakkt Bitcoin options will go live on December 9. The Bitcoin options will be based on Bakkt Monthly Bitcoin Futures contract and thus will be acting as another step in developing this asset class for its customers.

Some Key features will include the option of cash or physical settlement, low fees of $1.25 per options contract, European-style options that limits the opportunity for early execution and reduces operational burdens, capital efficiency, block trades which allow one to Access more trading opportunities as block trades by leveraging ICE Block, options analytics and instant messaging which lets you Collaborate with other market participants using ICE Chat.

It is also noteworthy that Bakkt will be charging the $1.25 per options contract from January 2020 after launching the options with the fee waiver in December 2019.

One of the most important things is that the new features will be based and built with the help of customer feedback and is supposedly designed to hedge or gain bitcoin exposure. Further, the post also explained:

“ICE Futures U.S. has self-certified the contract with the CFTC and we’re excited to leverage the benchmark futures prices and institutional-grade custody to meet the needs for a regulated options contract.”

The post also noted that the platform saw a record 590 contracts of the Bakkt Bitcoin Monthly Futures contract, making it an all-time high and a milestone for the platform.

Earlier this month, ICE, the governing body behind the New York Stock Exchange (NYSE) was able to successfully execute the first block trade of Bakkt Bitcoin futures contracts. This feature will now be a part of the Bitcoin Options Contract as well.

Bakkt is a bridge for institutional investors to be exposed to the crypto industry. However, the crypto community is divided over the impact of Bakkt futures services. According to John Todaro, the director of research at TradeBlock:

“It will take time for these entities to become comfortable with the asset class, identify strategies that are best used to trade the space, understand crypto market liquidity, and also understand the different regulatory and tax obligations across jurisdictions they operate in.” 

Anna Larsen
Anna Larsen has been a Crypto enthusiast since 2016. Fascinated by the technology and its usecases she decided to pursue a career in content creation related to this space. The journey has been exciting ever since.

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