Bank of America’s bitcoin thaw

Bank of America may be loosening its stance on bitcoin.

Driving the news: Bank of America has approved the trading of cash-settled bitcoin futures for some clients, Coindesk’s Will Canny and Tanzeel Akhtar report.

Why it matters: This would be a change in tone from a bank that’s historically distanced itself from the cryptocurrency business.

Flashback: “Currently, we do not lend against cryptocurrencies and do not bank companies whose primary business is cryptocurrency or the facilitation of cryptocurrency trading and investment,” Bank of America CEO Brian Moynihan said to the Senate Banking Committee on May 21.

State of play: Clients of brokerages sitting on the crypto trading sidelines have had other options like fintech startups Coinbase and Robinhood.

Yes, but: “We continue to evaluate the opportunities, risks and client demand for products and services related to cryptocurrency,” Moynihan had added in May. This was a sentiment shared by his peers at Citigroup and Wells Fargo.

  • Just last month, CNBC reported Goldman Sachs was trading bitcoin futures with crypto firm Galaxy Digital.

What they’re saying: “BofA getting into this as the crypto market cools is an interesting note on the momentum behind bitcoin’s institutional moment,” Coindesk deputy global news editor Zack Seward tells Axios.

  • “The fact that it’s a futures play gives BofA clients the ability to bet on the market through thick and thin.”

The bottom line: From weather derivatives to bonds backed by David Bowie’s music, financial services firms have long demonstrated flexibility to create and offer financial products in response to client demand.

Go deeper: Cryptocurrency jokes get serious

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ARK Buys $53.6m Worth of Square After Jack Dorsey’s Bitcoin Announcement

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Bitcoin Drops as Investors Buy $22K and $20K Puts

Bitcoin is falling a day after the options market saw increased demand for out-of-the-money or lower strike put options at $22,000 and $20,000.

The leading cryptocurrency was trading at a three-week low of $30,700 at press time, representing a 3.5% drop on the day. The decline has flipped the crucial 50-week simple moving average (SMA) support of $32,250 into resistance.

On Sunday, 500 contracts of the $22,000 put option expiring on Dec. 31 changed hands via the institution-focused over-the-counter (OTC) desk Paradigm. Similar volume crossed the tape for the $20,000 put expiring on Dec. 31.

“There was interest to buy BTC puts for December in a significant size,” Darius Sit, CEO of the Singapore-based QCP Capital, said. “We made the market for most of the large block trades over the weekend. There was decent interest to sell September BTC puts as well.”

Market makers are always on the opposite side of traders/investors and run a direction-neutral portfolio. That essentially means buyers of the $20,000 and $22,000 puts expiring on Dec. 31 were investors, most likely adding downside hedges against long positions in the spot/futures market.

A put option gives the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A put buyer is implicitly bearish on the underlying asset, in this case, bitcoin.

Overall the options market is still biased bullish for the long term. The six-month put-call skew, which measures the cost of puts relative to calls, remains entrenched below zero. In plain English, longer duration calls or bullish bets are priced higher than puts.

However, the one-week, one-month and three-month put-call skews are indicating a negative bias with bearish prints.

Bitcoin is currently changing hands near the lower end of the two-month-long trading range of $30,000 to $40,000.

If the support at $30,000 gives away, traders who sold puts at $30,000 over the past few weeks may resort to hedging – taking a short position in the futures or spot market – leading to a deeper decline.

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