Nakamoto to Hedge Bitcoin Exposure With Bitwise, Kraken Options

Nakamoto announced a partnership with Bitwise and Kraken to use Bitcoin options to hedge portions of its holdings. The firms arranged options-based protection designed to limit losses from price swings while keeping the underlying Bitcoin on Nakamoto’s balance sheet.

Under the agreement, Bitwise will provide asset-management and structuring expertise and Kraken will supply access to options markets and execution liquidity. The partners can execute trades on-exchange or through over-the-counter arrangements, depending on trade size and Nakamoto’s preferences.

Options give the holder the right, but not the obligation, to buy or sell Bitcoin at a set price on or before a specified date. Nakamoto can buy put options to lock in a minimum sale price or combine puts and calls in a collar to cap losses for parts of its position while retaining some upside.

Using options lets Nakamoto reduce short-term balance-sheet volatility and plan for funding or capital needs without immediately selling its Bitcoin holdings. The contracts can set price floors or limit potential losses for defined portions of the position and for defined time periods.

Bitcoin options markets have expanded in recent years, with deeper liquidity, longer-dated expiries and a wider range of strike prices. Those features give large holders more ways to match hedges to specific timeframes such as reporting dates or anticipated liquidity needs.

Bitwise manages crypto index funds and institutional products that use derivatives for hedging and exposure management. Kraken operates a trading platform that supports spot, margin and derivatives trading, including listed options. Nakamoto is a firm that holds Bitcoin and pursued a structured risk-management solution.

The partnership uses existing market infrastructure and the capabilities of an asset manager and a trading venue to implement the options strategies on Nakamoto’s behalf.