Ever since Bitcoin became an established investment commodity a few years ago, traders of futures contracts clamored for a chance to jump into the action without putting too much "skin in the game." Not all investors feel comfortable with the idea of exchanging dollars into cryptocurrency in order to take market positions; they prefer to speculate in futures contracts and options because they know what they can stand to win or lose.
Bitcoin futures at the Chicago Mercantile Exchange have matured to the point of attracting billions of dollars in contracts. When these financial instruments were introduced, trading volumes were quite modest, but short sellers eventually gained confidence after analyzing the volatility of the cryptocurrency markets. Even when Bitcoin goes on a bullish rally as it has done a few times in recent years, you can always count on day traders raking in profits and sending the currency exchange rate on a downward spiral, which is the action that short sellers at the CME crave.
As of June 25, a little over a billion dollars worth of short-selling futures contracts hinged upon the speculation of Bitcoin tracing backwards to a level near $7,500. The herd instinct has been strong among CME short sellers, but with the contract expiry on these options coming to an end soon, there will be many sad faces at the CME.
Even though other investment commodities such as gold, oil, and even coffee see billion-dollar swings in options trading on a daily basis, this trend is just starting to happen in relation to Bitcoin. There was a time when traders were concerned that BTC futures could exert too much pressure on the cryptocurrency markets, but such concerns appear to be dissipating. If anything, trading of BTC futures and options contracts have brought stability and even a sense of legitimacy to the digital currency markets, and seeing one billion dollars in losing options contracts is something that is bound to happen again in the future.
Perhaps some Bitcoin options traders will realize that the crypto market has matured enough to take more traditional and less speculative positions. Either way, BTC/USD will probably trade well above $7,500 for the rest of June.