Singapore: Institutional interest in Bitcoin-related contracts appears to be building and market measures indicate high anticipation of the launch of CME Group Inc. options on January 13, according to JPMorgan Chase & Co.

While a consortium known as Bakkt, which includes New York Stock Exchange parent Intercontinental Exchange Inc., began offering options last month, volumes and open interest have been “rather small,” strategists led by Nikolaos Panigirtzoglou wrote in a note January 10. Given the dominance of CME in trading Bitcoin futures on regulated exchanges, this new offering may change things, they said.

“There has been a step increase in the activity of the underlying CME futures contract” over the past few days, Panigirtzoglou wrote, noting that open interest has increased 69 per cent from year-end, and that the number of large open-interest holders has grown. “This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”

Introduction of new Bitcoin contracts has a mixed track record. At times it has appeared to be a drag on the price, such as when ICE debuted its new futures contract in September. And the price peak around $19,000 in December 2017 occurred just as CME and Cboe Global Markets Inc. launched futures on the world’s largest cryptocurrency.

Bitcoin was up 2.1 per cent to $8,209.42 as of 11am in Hong Kong, according to Bitstamp pricing, near its highest levels since mid-November.

Separately, Bitcoin’s intrinsic value has been rising, but remains below the market price following a significant divergence in the middle of last year, the report said. JPMorgan calculates intrinsic value by treating Bitcoin as a commodity and looking at the marginal cost of production including computational power employed and cost of electricity.

“The market price has declined by nearly 40 per cent from its peak while the intrinsic value has risen by around 10 per cent,” Panigirtzoglou wrote. But “the gap has not yet fully closed, suggesting some downside risk remains.”