The state of play for bitcoin's nascent options ecosystem

This week's launch of CME's options on bitcoin futures added yet another player to the mix in what is a burgeoning market for crypto-tied financial products.

And as the timeline below shows, the pace of developments in the ecosystem – particularly in the past few weeks – has quickened.

Bakkt – the former CEO of which, Kelly Loeffler left to take up an appointment to the U.S. Senate where she'll sit on a committee that oversees the CFTC – got the recent party started in December with its launch of options on bitcoin futures. 

Also eyeing an options launch in the first quarter of 2020: Bitfinex, which revealed the plan last fall during an interview. 

Moving into January, Bakkt hit a $1M volume milestone – one that would ultimately be broken in a single day by CME, which had a strong debut during its first day of business, as The Block reported Monday. 

FTX, which is backed by Binance, launched its bitcoin options product this month, and according to cofounder Sam Bankman-Fried, 2,000 options were trade on the first day. 

Paradigm, which blends the features of Telegram into a trading experience, has been used by market makers to trade over 20,000 bitcoins worth of options since launch. 

And while it may be too early to call it a victory for the ecosystem, as we noted yesterday, "these developments illustrate the emergence of a more robust and competitive exchange-listed derivatives market, which up until this point has been dominated by firms like BitMEX and Deribit."

Investors are taking note as well. Deribit, as reported by The Block's Celia Wan, is drawing attention and is currently in the midst of a deal that is seeing 10% of its common equity being sold to a pair of crypto firms and an as-yet-to-be-determined stable of smaller investors.

Simply put: the market appears to be in a bit of a growth period as 2020 gets underway.

The lay of the land

Below, let's look at some of the major products and services that have hit the market thus far, with their key elements broken down. Although each firm offers options, each firm offers vary infrastructure supporting the product.

For instance, Bakkt and CME both offer high-speed, low latency platforms that require investors to trade via Futures Commission Merchants. Bakkt, CME, and Deribit all manage order books, whereas FTX's platform is RFQ-based, meaning trading firms engage on a more bilateral basis.

The following is a detailed breakdown: 

Bakkt:

• Order book-based
• Settles in bitcoin future; contract equals 1 BTC
• 24-hour volumes: 47BTC
• Need to hook up to an FCM to trade; low latency connectivity
• US regulated

CME:

• Order book-based
• Settles in bitcoin future; contract equals 5 BTC
• Need to hook up to an FCM to trade; low latency connectivity
• 24-hour volumes: 55 BTC
• US regulated

FTX:

• RFQ-based; "simpler to spin-up, more flexible options but you can't see what things are trading at easily"
• Settles in USD
• No FCM connection; higher latency connectivity 
• 24-hour volumes: 3,455 BTC
• Doesn't serve US clients

Deribit:

1. Order book-based; "better for modeling"
2. Block trades enabled through partnership with Paradigm 
3. No FCM connection; moving into a "premier data-center in London at end of January"
4. Settles in "physical bitcoin;" contract equals 1 BTC
5. 24-hour volumes: ~12,500BTC
6. Doesn't serve US clients