Will it be a flash in the pan? Bitcoin options market heats up, CME trading volume sets new record

The Chicago Mercantile Exchange (CME) launched Bitcoin options contracts in January this year, which received high expectations but initially performed below par, even hitting a embarrassing record in mid-March with only three options contracts traded in a single day. However, following Bitcoin's third halving event, trading volume for CME options gradually picked up, setting new records since the product's launch.

• New user registrations in May have surpassed those in April
• Open interest and trading volume hit new highs last week

As one of Wall Street's major financial institutions, the CME Group introduced Bitcoin options contracts in January amidst much anticipation, with even JPMorgan Chase optimistic that this move could attract traditional financial institutions. Despite reaching a historical high of $5.4 million in trading volume on January 17, the volume has since been on a declining trend.

It seems that the Bitcoin halving event has driven the growth of options trading, with trading volume and open interest for CME Bitcoin options surging since last Monday (11th).

On May 8, CME also noted in their Blog that compared to the halving event in 2016, the presence of futures and options markets today has created a different landscape for the Bitcoin market, potentially leading to a situation of supply shortages and greater price volatility post-halving. Additionally, according to information from media outlet The Block, CME has seen 256 new users trading options since early May, nearly equivalent to the total number of new users in April.

Deribit Leading the Options Market

Despite some growth, the trading volume and open interest of CME Bitcoin options products still lag far behind the options giant "Deribit."

In the above figure, it can be seen that CME began to grow its market share in Bitcoin options trading in early May, even surpassing LedgerX and OKEx, trailing only behind Deribit. Deribit reached a trading volume of up to $116 million on May 13.

Binance Enters the Options Market

In addition to CME's progress, Binance, which continues to capture the crypto derivatives market, officially launched Bitcoin options trading in April. Unlike Deribit, OKEx, CME, Bakkt, and other exchanges, Binance introduced "American-style options."

Note: The main difference between European and American options lies in the exercise time of the option. American options allow traders to exercise the contract at any time during the validity period before the option expiration date, while European options can only be exercised on the expiration date of the option.

It appears that Binance has not fully committed to promoting options trading, possibly due to low trading volume and not being included in data platforms like Skew. Currently, options trading is only available through the mobile app, and Binance, as one of the main exchanges for retail traders, has faced criticism for introducing more complex options trading. The Block's research director also considers this to be highly unethical behavior.

Binance has shown impressive performance since entering the derivatives market. According to Skew, Binance ranks third in futures trading volume in the past 24 hours. While the options market is a new area for Binance, Deribit still firmly holds its position as the leader in the options market. Whether Binance, or even CME targeting institutional users, can achieve great success in the options market remains to be seen.