Analysts suggest that Bitcoin derivatives traders are willing to pay a premium for short-term downside protection, despite a more optimistic outlook for longer-term options distributions.

CF Benchmarks’ analysis of Chicago Mercantile Exchange (CME) options on bitcoin futures reveals that investors continue to pay elevated premiums for out-of-the-money (OTM) puts, indicating a bearish sentiment in the short term. This trend persists even after a softer U.S. Consumer Price Index (CPI) inflation report.

The analysts highlight a “flatter” volatility curve for longer-dated options, with a slight skew towards calls. This suggests a more positive outlook for Bitcoin’s longer-term prospects. They note that increased institutional involvement may contribute to this trend, as institutional investors tend to exhibit less extreme swings in sentiment.

Options, which provide traders with the right but not the obligation to buy or sell an underlying asset at a predetermined price, are being closely monitored for indications of market sentiment. While call options imply a bullish stance, put options suggest a bearish sentiment.

In related news, the Financial Times reports that the CME Group is considering launching bitcoin spot trading alongside its existing futures products. This move would cater to traders seeking regulated platforms for cryptocurrency transactions and could enable profit opportunities through basis trades, leveraging the difference between futures prices and spot prices.

While the launch of bitcoin spot trading on CME has not been finalized, it underscores the growing interest in regulated cryptocurrency trading platforms. CME Group, already a major player in bitcoin futures trading, declined to comment on the potential expansion.

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Shares of Coinbase (NASDAQ:COIN) fell nearly 8% on Thursday, dropping to $202.49, following a Financial Times report that the Chicago Mercantile Exchange (NASDAQ:CME) might soon offer spot bitcoin trading amid strong interest from its clients.

Cryptocurrencies were up on the day, with the CoinDesk 20 Index, which tracks 20 of the largest digital tokens by market capitalization, rising 0.91% over the past 24 hours. Bitcoin was up by half a percent, benefiting from Wednesday’s better-than-expected inflation report. Despite the drop, COIN is up 29% year-to-date, buoyed by the rally in crypto prices since the beginning of the year.

Chicago-based CME, the world’s largest futures exchange, has a history spanning more than a century and is a financial powerhouse. Until now, Coinbase has profited from being the most trusted crypto exchange in the U.S., but this advantage could be challenged if CME enters the spot bitcoin trading market.

Designated by U.S. regulators as a “systemically important financial market utility,” CME is subject to stricter supervision. Many investors believe this designation implies the government would prevent CME from failing in a financial crisis. CME is already the leading bitcoin futures exchange in the U.S. by open interest.

The exchange has been in discussions with traders interested in trading bitcoin on a regulated marketplace, sources familiar with the matter told the Financial Times. A significant barrier for traders in dealing with digital assets is the lack of trust in crypto exchanges, particularly after several high-profile failures, including the collapse of the once-popular crypto exchange FTX.

The recent launch of spot bitcoin exchange-traded funds has provided traders with a safer way to invest in bitcoin, with over 500 institutions allocating more than $10 billion to these funds within the first three months. An additional $40 billion came from retail traders.

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The US Securities and Exchange Commission has yet to decide on spot Ethereum exchange-traded funds. On May 16, Billy Markus, co-founder of Dogecoin, expressed his doubts about their approval, suggesting that the SEC is “compromised” and may reject the ETFs.

Markus made his skeptical comment in response to a social media post discussing the importance of spot Ether ETFs for the ecosystem and the potential impact of a negative decision on Ethereum. He tweeted, “nothing good will come out” of the spot ETH ETF application.

Markus’ comment reflects a broader pessimism about the SEC’s ability to make fair and unbiased decisions regarding Ethereum and cryptocurrency. Despite his skepticism, he believes the regulator’s decision on spot Ether ETFs won’t negatively impact Ethereum’s trajectory or the cryptocurrency market as a whole. This sentiment echoes the prevalent skepticism surrounding spot Ethereum ETFs.

Recently, finance lawyer Scott Johnsson suggested that Ethereum’s legal classification will play a crucial role in the upcoming ETF decisions, highlighting a key distinction in the SEC’s approach to Bitcoin and Ethereum. While Bitcoin’s security status wasn’t a major focus during spot ETF filings, Ethereum’s classification is receiving more regulatory scrutiny, indicating a shift in focus for digital assets.

The upcoming decision dates for VanEck and ARK Invest’s applications for Ethereum ETFs, scheduled for May 23 and May 24, respectively, have sparked intense speculation within the crypto industry. The potential approval of Ethereum ETFs carries symbolic importance, solidifying crypto’s legitimacy as an asset class and reaffirming its role in the evolving financial industry.

The SEC’s recognition of Ethereum’s non-security status, demonstrated by the approval of an Ethereum futures ETF for trading in October 2023, established a clear precedent for the approval of a spot Ethereum ETF. Experts believe any deviation from this path would create regulatory uncertainty and weaken market confidence.

Hong Kong’s approval of spot Bitcoin and Ethereum ETFs, as well as their trading, underscores the increasing global acceptance and recognition of the potential of Ethereum-based financial instruments.

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JPMorgan (NYSE:JPM) estimates that the current cost of mining Bitcoin has dropped to around $45,000, down from over $50,000. This decrease follows the quadrennial halving event last month, which cut miner rewards by 50%.

The hashrate, which measures the total combined computational power used for mining and processing transactions on the Bitcoin network, did not immediately fall post-halving as expected. According to JPMorgan, this delay was due to the launch of the Runes protocol, a new form of token creation that temporarily spiked transaction fees, boosting miner revenue and offsetting the reduced issuance rewards from the halving.

“This provided a temporary boost to miner revenue in the immediate aftermath of bitcoin halving,” analysts led by Nikolaos Panigirtzoglou wrote. However, the report noted that the increase in fees was short-lived, with user activity and fees dropping significantly in recent weeks. This decline highlights the ongoing challenge for bitcoin miners to maintain sustainable revenue, particularly in the post-halving environment.

As the Runes hype faded, network power consumption fell more than the hashrate, indicating that unprofitable miners with inefficient rigs have exited the network. The report explains that there’s a feedback loop with Bitcoin prices: as prices decline, more unprofitable miners are pressured to leave the network, leading to a larger drop in hashrate and mining costs.

JPMorgan does not foresee any near-term upside for Bitcoin prices due to several headwinds, including the lack of positive catalysts and diminishing retail interest.

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Mastercard (NYSE:MA) has announced the selection of five startups to participate in its digital assets program, which aims to foster the development of blockchain use cases.

The chosen startups will join Mastercard’s Start Path blockchain and digital assets program, focusing on the creation of blockchain use cases and user experiences.

Through this initiative, Mastercard (MA) will collaborate with industry experts and fintech firms to explore various applications of digital assets and blockchain technology in addressing real-world challenges.

In a press release issued on Wednesday, Mastercard (MA) highlighted its extensive experience in building a global payments network based on cards, positioning itself to connect regulated money, bank deposits, stablecoins, and central bank digital currencies (CBDCs) with startups’ specific use cases. The program aims to innovate new solutions and improve efficiencies in digital commerce user experiences.

The Five Selected Startups 

1. Kulipa: A French-based company that facilitates crypto payment card issuance for digital wallets.
2. Parfin: A UK-based firm specializing in enterprise-grade software products to assist financial institutions in adopting blockchain rails.
3. Peaq: Headquartered in Singapore, peaq offers permissionless, borderless digital infrastructure for real-world applications.
4. Triangle: A U.S.-based startup focusing on sustainability through a data platform that integrates climate data with finance.
5. Venly: Based in Belgium, Venly simplifies blockchain integration for developers and businesses to support industry growth and digital transformation.

Mastercard’s Start Path program will offer selected blockchain, digital assets, and Web3 startups opportunities for collaboration, customized training, and access to Mastercard’s customer base and distribution channels throughout the virtual four-month program.

Since its inception in 2014, Mastercard (MA) has supported over 400 startups from 54 countries through the Start Path program.

Axel Cateland, the founder of Kulipa, expressed enthusiasm about the program, stating, “Through Mastercard Start Path, we’re looking to uncover new ways to unlock crypto mass adoption and wider financial inclusion with convenient, global stablecoin payments.”

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