On Thursday, cryptocurrency derivatives exchange, BIT, launched options connected to the payments-focused cryptocurrency, XRP. This novel financial product renders it possible for traders to speculate on XRP options without actually owning the cryptocurrency, therefore any gains and losses will be counted in US dollars. To ensure efficient liquidity for this service, the task has been trusted to institutional liquidity provider, OrBit Markets.
The addition of the XRP option extends BIT’s existing arsenal of options, which cover cryptocurrencies, such as bitcoin, ether, Cardano’s ADA, Toncoin, and Milady Coin.
Options are derivative contracts granting the buyer the liberty to either purchase or vend the underpinning asset at a pre-fixed price before a specified date. They serve a dual purpose, allowing the purchase decision (a call option) and the sell decision (a put option). Traders use options as an insurance to counterbalance any negative turns in the market. Furthermore, traders can increase their earning capacity by writing options on their current spot market holdings.
Implementing XRP options into the game delivers an inviting opportunity not only to institutional traders, but to retail traders as well. It is an opportunity to hold both long and short positions of options which increases the market accessibility of this product, stated Justin Buitendam, leader of institutional sales at BIT.
Currently rated as the world’s fifth largest cryptocurrency, XRP holds a market capitalization of approximately $30.88 billion. This cryptocurrency, similarly to other altcoins, has been more unstable compared to bitcoin and ether.
Seen as a groundbreaking move, BIT’s decision to list XRP options follows the U.S. District Court’s judgement in the case against Ripple Labs about potential securities law violations via XRP sales. The court ruled distinctively about XRP’s status, viewing it as non-security when circulated on centralized exchanges. However, it considered XRP as a security when sold to institutions. In light of this nuanced ruling, many exchanges revamped their XRP spot market.
In contrast, the market recently felt a new wave of uncertainty when the SEC expressed intentions to appeal the court’s verdict. Despite this volatility, XRP experienced a 70% surge to nearly 95 cents following the July 13 court ruling. Nevertheless, the current trading value stands at approximately 65 cents.
Source: Coindesk
