Cryptocurrency options function as default option contracts in the sense that they are a right, not an obligation, to purchase cryptocurrencies at a fixed price at a future date. In this case, the asset is represented by cryptocurrency futures contracts traded on the CME, with a single how does crypto market cap increase option contract equivalent to a single futures contract consisting of 5 BTC or 50 ETH. They expire monthly on fixed dates, with two additional months of December contract. The main advantage of trading Bitcoin futures contracts is that they offer regulated exposure to cryptocurrencies.
Recently, popular statistics, including market value to realized value (MVRV, a ratio that reflects current prices versus average coin prices) suggest that Bitcoin is about to begin a period of accumulation based on history. On the other hand, this may be an indication of confirmation bias, as investors are looking for signals that confirm their beliefs. As can only be expected in the cryptocurrency ecosystem, the range of views is extreme. Some see this market correction as a good time to “buy the fall.” Others believe that this is the end of the party for cryptocurrencies.
In any case, it will be interesting to continue to follow the development of the future of cryptocurrency. What we could see happening is a financial revolution or a colossal disaster for investors who have since made a fortune growing cryptocurrencies. Certainly, the view of cryptocurrencies as a decentralized asset available on a peer-to-peer network with no barriers to entry is at odds with recent actions such as the freezing of withdrawals by some platforms. When bitcoin was first introduced in early 2009, it was a new type of asset. Although trading was initially scarce, the price increase brought the value to nearly US$20,000 at the end of 2017.
With well-informed people setting the tone for future regulation, there is hope that a viable system can be developed for investors, consumers, cryptocurrency companies and traditional banks. Informed regulators will understand crucial and important issues, such as the differences between a value storage system like Bitcoin and an advanced ledger with smart contracts like Ethereum. Congress introduced some crypto regulation laws in the first half of 2022, but the wheels of bureaucracy are moving slowly and this issue deserves in-depth attention and careful analysis.
Cryptocurrency futures are legal in the United States and can be traded on authorized cryptocurrency exchanges or on the CME using specific brokers. You can trade cryptocurrency futures options with brokers such as Interactive Brokers, Edge Clear, Ironbeam or Tradestation. Suppose an investor buys two Bitcoin futures contracts for a total of 10 bitcoins. The price of a single bitcoin when the futures contract was purchased was $5,000 each, totaling $50,000 for both futures contracts.