Bakkt is looking to beat CME to the punch on options tied to bitcoin

Intercontinental Exchange's cryptocurrency venture Bakkt is eyeing the launch of an additional derivative tied to the bitcoin market, according to several sources with knowledge of the firm's product roadmap. 

Bakkt, which launched its long-awaited contract for physically delivered bitcoin futures in September, is aiming to add bitcoin options to its product suite, according to sources. The firm, which is led by former ICE marketing executive Kelly Loeffler, is hoping to beat rival CME Group, which said last month that is launching its own option contract tied to the cryptocurrency in Q1 2020. One source said the firm has been "hyping up" the options to market makers for the past few weeks. Representatives at ICE did not respond to an inquiry prior to publication.

"I expect CME and ICE to battle like hell for dominance in this space," said one source. 

Indeed, competition in the cryptocurrency derivatives space has been heating up. Elsewhere, ErisX and Seed CX are building out their respective derivatives cryptocurrency platforms. Deribit, a European-based firm, commands over 90% of the market for bitcoin options trading. It recently rolled out a block trading functionality with New York-based Paradigm.

As for Bakkt, the firm's futures market has been off to a muted start for its two futures contracts. As noted by The Block's Larry Cermak, volume for Bakkt's monthly contract reached a new daily high on Wednesday with $1.93 million worth of futures trading. 

Source: The Block, ICE

Derivatives, to be sure, are just one aspect of Bakkt. The firm, which holds a license to operate as a trust from the State of New York, has a merchant and consumer business in the works. It also serves as custodian, competing with the likes of Fidelity and BitGo.