CME to Launch Bitcoin Options Contracts Tomorrow Morning! JPMorgan Chase Observes: Will Impact Traditional Financial Institutions

A recent report by analysts at JPMorgan indicated that traditional financial institutions are showing increasing interest in Bitcoin-related contracts, with high expectations for the Bitcoin options on futures to be launched by CME Group on the 14th (13th in Chicago time) of this month.

(Updated at 10:00 AM on January 14) According to a report, the first-day trading volume of Bitcoin options on CME ($2.19 million) has exceeded the first-day trading volume of Bakkt launched in December last year ($1.15 million). The price of Bitcoin also returned to $8,300 shortly after the start of CME options trading.

In a report on January 10, JPMorgan's market analyst Nikolaos Panigirtzoglou mentioned that Intercontinental Exchange (ICE)'s derivative trading platform Bakkt started offering options trading last month, but the trading and open interest were relatively low.

Panigirtzoglou stated that this is because CME dominates the regulated Bitcoin futures field, so the introduction of Bitcoin options contracts by CME may bring changes. He explained:

In the past few days, the trading volume of CME futures contracts has continued to rise, with open interest increasing by 69% compared to the end of the year, and open interest in large contracts has also increased. This unusually strong trading activity may reflect high expectations from participants in the options contract market.

In fact, Bitcoin products introduced by traditional financial institutions seem to have a significant impact on prices. Back in 2017 when CME announced the launch of Bitcoin futures, the group's honorary chairman Leo Melamed bluntly stated:

We will tame Bitcoin.

What is the relationship between "Bitcoin options" and "Bitcoin futures"?

CME's Bitcoin options give buyers the right to speculate on price movements and buy or sell a Bitcoin futures contract at a specific strike price in the future. At the end of the trade, in-the-money options will be exercised according to CME's reference price (BRR).

When CME launched futures in December 2017, the price of Bitcoin was around $19,000, and since then, the price of Bitcoin has been declining.

Currently, the price of Bitcoin is fluctuating around $8,132, approaching its highest level since mid-November last year.

Furthermore, the report also mentioned the intrinsic value model of Bitcoin, which considers Bitcoin as a commodity and calculates its intrinsic value based on the marginal cost of production (including computing power and electricity costs).

Reports indicate that while the intrinsic value of Bitcoin continues to rise, it is still lower than the market price when compared.

Analyst Panigirtzoglou concluded that despite the price falling by nearly 40% from last year's peak, and the intrinsic value rising by approximately 10%, the price difference still exists between the two, indicating that Bitcoin still carries downside risk.

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