Bitcoin Options Specialist Bitnomial Launches Block Trading
Exchange for Bitcoin-related derivatives Bitnomial launched block trading for the first time in an industry effort to capitalize on long-standing traditional financial practices, as institutional interest in bitcoin and ether options has increased significantly in the United States.
As the digital asset market collapsed in the fourth quarter of 2022, open interest in the United States and other countries plummeted. However, open interest, a metric that reflects the number of outstanding contracts on outstanding options contracts, has recovered in the first quarter of this year.
Bitcoin (BTC) fell about 7% in the previous seven days at the stock market close Thursday in New York. “Restored” is an understatement for bitcoin options on Deribit; they hit an all-time high last month, as previously reported by Blockworks. According to the company, the volume of Deribit, which has long been one of the world’s largest bitcoin and cryptocurrency options exchanges, exceeded $20 billion at the time.
Regulators in the United States have limited digital asset options for bitcoin and ether (ETH). Bitnomial President Michael Dunn told Blockworks in an exclusive interview on Thursday that the exchange is launching block trading this week because “now is a good time because we are seeing a lot of crypto-native companies coming” into the bitcoin options trading space with “dry powder to shop for.” royally.”
And, according to Dunn, they specifically asked for a customized Bitcoin option ledger basket. Crypto hedge fund managers, family offices and other types of traders are typically looking to market makers on digital asset options, often contacting multiple counterparties to try to lock in the best price with the best possible execution.
Block trading is an over-the-counter (OTC) arrangement in which the market maker and buyer agree to take a certain amount of a derivative for a carry fee.
It takes longer than executing algorithmic trades on BTC options tied to the underlying bitcoins. However, traders find this practice beneficial if they are buying in bulk and buying futures contracts at a discount where the market values their opening and closing costs.
“They come knocking on our door saying, ‘Hey, you guys have a lit order book and electronic execution, that’s great.’” But we want to do more complex, structured trades that make sense atomic and on a larger scale, and look around and do a block deal. Additional excerpts from a Blockworks interview with Dunn, who previously worked on the Chicago options trading scene and has experience with quantitative option market building on traditional options classes, are provided below.
