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The Reasons Why Bitcoin Options Won’t Break Crypto Market

The Reasons Why Bitcoin Options Won’t Break Crypto Market

If Options Trading affected traditional markets and made traders to reconsider their strategies, cryptocurrency traders don’t face such issues. It is possible to see how Bitcoin Options are gaining their popularity, especially after the CME Group launch. Over the last two years, many traders change their direction from Bitcoin Futures to Bitcoin Options.

Bitcoin Options – How They Differ From Bitcoin Futures

The main difference between options and futures is obligations. If both parties are obliged to fulfill their conditions when concluding a futures transaction, for example, one side decides to sell the asset, and the other decides to buy it. But with options, everything is different – the investor gets the right to choose and can refuse the transaction at the last moment.

Options are available for sale and purchase. If the investor sells options, then he will receive the right to buy (or not buy) the asset at a specific rate and at a predetermined time. And vice versa. In this case, the investor must pay a certain premium, which will not return to him, regardless of the decision.

Now both types of contracts – futures and options on Bitcoin, are now available on the CME Chicago Mercantile Exchange. Since the beginning of the year, there has been an increased demand for options. Therefore, it is quite natural that immediately after the launch of a new financial instrument on CME, the rate of the first cryptocurrency sharply increased by 5% and since then has not dropped below $ 8600.

The Influence of Bitcoin Futures

Many experts shared the opinion that Bitcoin Futures would reverse the market negatively. For example, Christopher Giancarlo, an attorney and a former chairman of CFTC (Commodity Futures Trading Commission), stated that the approval of Bitcoin Futures was intentional as the primary weapon to destroy the crypto market wholly. 

“We saw how the bubble grows and decided that the best way to eliminate it would be to provide the market with tools to interact with it. If you think that the price is too high, but do not have the means to express your views if you do not have a derivative, then only supporters remain, and this is their market,” – said Giancarlo in 2019.

How Institutional Investors May Use Bitcoin Options?

Many analysts and traders supported Giancarlo’s vision as experts also believe that institutional investors used a new tool for betting against Bitcoin, which ultimately expanded the market.

The expert community came up with a conclusion that the increase in options volumes indicates investor interest, and this liquidity will help Bitcoin continue to grow in the long term. According to experts, the global emergence of options and any other tools for investing in Bitcoin expands the infrastructure and popularizes it, which is suitable for the market and the price.

The launch of CME options should not affect the value of Bitcoin in the same way as it did with futures at the end of 2017. Experts explained that the cryptocurrency market is no longer a bubble, and there is no such excitement around digital money. Therefore, a new financial instrument should positively affect the value of the asset, provide it with some support.