Heavyweight investment bank is keeping a close eye on bitcoin's derivative market
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Investment bank JP Morgan is keeping a close eye on the bitcoin options market.
The financial services giant has released a 74-page report on cryptocurrencies, which talks about genuine demand for non-linear institutional trading products in crypto markets.
While institutional participation in the bitcoin market is increasing, broader adoption remains weak due to price volatility, the report mentions, while adding that crypto market volatility is about five times greater than core markets like equities or commodities.
Interestingly, volatility is what makes option trading attractive. An option contract is an agreement between a buyer and seller that gives the the former the right but not the obligation to buy or sell a particular asset at a later date at an agreed upon price.
A call options gives the right to buy, while a put option gives the right to sell. Volatility has a positive impact on options price.
Options are cheap in a low-volatility environment. Hence, traders prefer to buy options when volatility is very low and write or sell options when volatility rises to extremes.
Currently, Deribit, Chicago Mercantile Exchange and Bakkt are offering options on bitcoin. The combined option open interest at Deribit/LedgerX is decent at around $500 million, in dollar terms around half of the futures open interest at Bitmex and CME combined, as noted by JP Morgan.
The investment bank's report also discusses how stablecoins such as Facebook's Libra and blockchain's might be used in banking. |
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Drops Below 200-day MA
BTC: Price: $8,700 | Market cap: $159 billion | 24-Hr Volume: $44.67 billion
Trend: Bearish Bitcoin is flashing red at press time, having suffered a head-and-shoulders breakdown on Tuesday.
The cryptocurrency is currently trading under the 200-day average at $8,786. The long-term average has been breached for the first time since Jan. 27.
The 14-day relative strength index is hovering at 36.00, meaning there is room for further sell-off toward the support level at $8,213 (Jan. 24 low).
However, the indicators on the hourly and 4-hour charts are now reporting oversold conditions. So, a bounce to $9,000 cannot be ruled out.
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| | | | Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. |
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