JPMorgan Chase's latest report indicates a genuine market demand for Bitcoin derivatives.

In the past few years, we have witnessed the gradual shift of the Bitcoin trading market from spot trading to derivatives trading. The transformation of spot exchanges like OKEx, Huobi, and Binance, along with the emergence of new derivative exchanges such as Bakkt and FTX, has demonstrated this trend. Financial giant JPMorgan also emphasized the attractiveness of cryptocurrency derivatives in a recent research report focusing on cryptocurrency.

The Real Demand for Bitcoin Derivatives

If you were involved in cryptocurrencies around 2017-2018, you may remember Jamie Dimon, CEO of JPMorgan Chase, being unfriendly towards Bitcoin. He even once criticized cryptocurrencies as a fraud, worse than the tulip bubble, in an interview. Despite this, JPMorgan Chase did not stop its research on cryptocurrencies and blockchain technology. Apart from developing its private chain Quorum and stablecoin JPM Coin, JPMorgan Chase also periodically releases research reports on Bitcoin's development.

In the latest research report by JPMorgan Chase's global research team,the report highlights the increasing importance of institutional investors in the cryptocurrency market, with financial giants paying close attention to the development of the Bitcoin options market. In recent months, the options contract market has seen explosive growth, with steady increases in options trading volumes on platforms like Deribit and LedgerX, and both CME and Bakkt have introduced options contracts for their clients.

In addition to noting the rapid growth of the derivative exchange Deribit in the article, JPMorgan Chase further emphasizes the real demand for non-linear products in the cryptocurrency market aimed at institutions.

JPMorgan Chase Still Unwilling to Join the Fray

However, JPMorgan Chase's recognition of the genuine demand for cryptocurrency derivatives does not mean the company intends to engage in Bitcoin trading. In fact, the report believes that cryptocurrencies have not yet proven their effectiveness in hedging extreme macroeconomic environments and geopolitical turmoil. Despite the decrease in cryptocurrency volatility, it is still five times higher than core markets such as stocks and commodities. As shown in the chart below, Bitcoin's volatility is greater compared to gold in the 1970s, the Nikkei Index in the 1980s, and the Nasdaq Index in the 1990s.

Overall, while JPMorgan Chase believes that the gradual introduction of cryptocurrency derivative products by compliant exchanges indicates that the market is maturing, there is still not enough incentive for the company to enter the market at present. They even consider Bitcoin to be currently overvalued, with a gap existing between its current value and its intrinsic value (estimated to be at the $5000 level). Additionally, the issue of trading volume manipulation is cited as a reason for institutional hesitation in the report.

Nevertheless, financial giants continue to monitor market developments, which is also a positive sign for the cryptocurrency market.

Related Reading

• CME to Launch Bitcoin Options Contracts Tomorrow! JPMorgan Chase Observes: Will Enter Traditional Financial Institutions
• Expanding Retail Investment Landscape! Morgan Stanley Acquires E*Trade for a Large Sum, Creating the Largest Scale since the Financial Crisis

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