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Coronavirus effect: CME and Bakkt


The dust already appears to have settled on the cryptoverse. But, not everything has returned to normal. The Coronavirus Effect is a consequence of the pandemic, leaving the Bakkt and CME crypto exchanges soulless.

Days after the alarming volatility reached in the crypto ecosystem, and the fall in Bitcoin prices, options trading has been the most affected.

Two different but alarming situations due to Coronavirus

The demand for Bitcoin (BTC) options has decreased alarmingly in the United States as the pandemic progresses in that country. With more than 13,737 cases and more than 200 deaths so far. In this way we can see that the Coronavirus Effect manifests itself, with a complete economy stagnating and a society suffering.

On the one hand we have the Chicago Mercantile Exchange (CME), which has reached its historical minimum for Bitcoin options trading. Whereas, the situation in Bakkt is even more worrisome, as there has literally been no one here for weeks.

Future trading volume in Bakkt - Source: Skew.
Future trading volume in Bakkt – Source: Skew.

According to Bakkt data, not a single Bitcoin options contract was traded last week. This happens while the price of the main cryptocurrency has recovered after the announcement of the Coronavirus health crisis, increasing the volatility of the cryptocurrency.

In the case of CME, it traded just three Bitcoin option contracts on Tuesday. Approximately 15 BTC, or more than $ 80,000.

Futures Trading Volume at CME - Source: Skew.
Futures Trading Volume at CME – Source: Skew.

This is the lowest volume for CME in the institution’s history for Bitcoin contracts. These were launched on January 13, 5 days after reaching a record high of $ 5.4 million, followed by a progressive contraction.

In this way we can see that the Coronavirus Effect has managed to reach even the futures markets, using the crypto market as a bridge.

Two surprising cases

Normally the demand for options tends to increase when volatility does, since the standard deviation of an asset’s returns, which is used as a measure of uncertainty, serves as an incentive to trading. Or at least, this is the case in the traditional world, where this type of asset is already a few decades old.

An options contract grants the right, but not the obligation, to buy or sell the specified amount of the underlying on or before the expiration date. A call option gives the holder the right to buy, while the put option gives the holder the right to sell.

This fact seems surprising, or so the experts think. However, the Coronavirus brings more questions than answers. What has happened to the volume of operations? Are they preparing for a rebound? Is there something we do not know? Is it the fault of the Coronavirus Effect?

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