US Bitcoin Derivatives Market, Highlights of 2019

The United States Bitcoin derivatives market witnessed a slew of developments in 2019 as "Old players" set trading volume records and "New players" introduced novel market products.

Overall, 2019 saw the emergence of the Bitcoin derivatives market transitioning from a corner of the broader crypto trading landscape to taking a more significant place within the industry as a whole.

With the U.S. Securities and Exchange Commission refusing to approve any Bitcoin exchange-traded funds, Bitcoin derivatives seen to have become a firm favorite for institutional crypto traders, at least in the U.S.Outside the country, the crypto derivatives bug appears to be spreading, with nations like Singapore taking definitive steps to regulate the market adequately.

"Bitcoin derivatives have overall been a positive for Bitcoin as this allows for more traditional institutional investors to gain comfort in the market as derivatives are widely used in traditional financial markets. Although still a relatively young market, derivative products such as CME's Bitcoin Futures, OKEx's Perpetual Swap, and Bakkt's Bitcoin Futures, are driving massive demand and have outpaced Bitcoin spot trading this year."

Bakkt launches physically settled Bitcoin futuresOne of the major stories from the latter part of 2018 was the news that the Intercontinental Exchange operators of the New York Stock Exchange was set to launch Bakkt - a physically settled Bitcoin futures platform.

"With our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset."

Following the launch of its physically-delivered BTC futures product, Bakkt introduced Bitcoin options as well as a cash-settled Bitcoin futures contract, which debuted in ICE Singapore earlier in December.

Despite Bakkt branching into cash-settled Bitcoin futures and possibly challenging CME, the latter has come out to say it has no intention of listing a physically settled BTC futures product CME will be launching a Bitcoin options product in January 2020.

Bitcoin options and the prospects of crypto derivatives in 2020 and beyondBack in October 2019, CME predicted that Bitcoin options will experience high demand in the Asian market.

"Although still a relatively young market, derivative products such as CME's Bitcoin Futures, OKEx's Perpetual Swap, and Bakkt's Bitcoin Futures, are driving massive demand One of the advantages of Bitcoin derivatives is that leverage can be used to make large transactions with a small amount of capital while being able to forecast future market risk and speculate on price volatility. However, if the number of BTC derivative transactions increases significantly, there is a possibility that the derivatives will cause Bitcoin's market price to rise or fall sharply."