Bitcoin derivative pioneer, Cboe experiences peer pressure after the CME group enters the segment.

  • Mar 20, 2019 AEDT
  • Team Kalkine
Bitcoin derivative pioneer, Cboe experiences peer pressure after the CME group enters the segment.

Bitcoin prices along with many other crypto pairs are marking an uptick amid the increased recognition in the digital assets. The Bitcoin price (BTC/USD) surged from the level of $3681.8 (Day’s low on 4th March 2019) to the recent high of $4050.6 (Day’s high on 16th March).

The rise in Bitcoin prices are mainly due to the increase in acceptance of the digital currency, many start-ups and tech companies are providing means to secure and transfer the digital asset to replace the conventional way of buying and selling in the real world.

The Bitcoin also denoted a recognition earlier when it was regarded as a financial asset and was placed as a derivative product by the U.S. company Cboe Global Markets. The recognition of the digital currency as a derivative product signified an increased acceptance of the digital asset across the globe and in turn supported its prices in the international market.

However, the increased competition in the segment is now exerting pressure on the company to exit the segment. The Chicago-based group is now considering exiting the digital segment amid high competition and a war of liquidity between the Cboe and the CME group, which followed the entry into the segment after Cboe. The company said that they will now honor the current contracts dated for settlement in April, May, and June and it will not list new bitcoin future contracts.

The factor which exerted the pressure on the company was the entry of rival CME group, which also started the bitcoin derivative segment and the apprehension of retail investors in the market. The company’s bitcoin derivative was selling at $3,890 per bitcoin on 15th March as compared to $20,500 in December 2017 during post launch of the product.

The competitive pressure on the company was in terms of less liquidity on its derivative contract, which deviates the investors and buyer of the product to the market and exchange where they can minimize the liquidity risk.

The Open interest which marks liquidity in the future market, in Cboe’s market, was less than 3,000 contracts for the week ended 15th March 2019, as compared to 17,000 contracts at CME. Also, the CME marked a significant volume in February when 92,000 contracts worth $360 million traded on the exchange.

The divest of retail investors, since the listing of the product in 2017 amid fall in prices combined with shifting volume to the rival, is forcing the bitcoin derivative pioneer to reassess the position of the company in the crypto-currency segment.

However, the Chief Strategy Officer of the company sees it as an excellent opportunity to tap the institutional investors as the market is less heated now as compared to the year 2017.

The current tug-of-war between the two rivals to take the significant market share of the segment in their respective account and the battle for the liquidity seems to be favoring the rival CME group.


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