The Nasdaq Stock Market and Cantor Fitzgerald are the latest mainstream financial institutions to enter the market, with plans to offer cryptocurrency derivatives by the first half of 2018. That's on the heels of CME Group (NASDAQ:CME) and the CBOE promising bitcoin futures contracts by the end of the year. The emergence of futures contracts and derivatives from large institutional traders marks a significant milestone in the maturity of Bitcoin and the cryptocurrency market as a whole.
Industry Executives On Future Of Cryptocurrency
- Tor Blair, Head of Growth and Marketing Strategy at Enigma
The launch of Bitcoin futures on Nasdaq and Cantor Fitzgerald’s announcement that it is currently seeking to launch bitcoin derivatives on its exchange are additional signals of the increasing demand for cryptoassets. These moves will bring new professional interest in cryptoasset investment and trading. As new cryptofinancial assets and products for the broader market are created, sophisticated investors and traders will demand more usable and trusted cryptofinancial data and the tools to act on that data.
- Christopher Grey, Co-Founder of CapLinked, a data-sharing consultancy
The futures trading at CME and Nasdaq signals that institutions want to seriously get involved with trading BTC in size. This does make increased regulatory oversight more likely. It also creates risk for BTC that hedge funds and investment banking trading desks will try to use the future to manipulate the prices of BTC. This activity has happened frequently in other markets, including commodities like oil, natural gas, gold, and even in sub prime debt, leading to the financial crisis. Using futures and derivatives, sophisticated large traders can drive the price down simply by shorting and selling something. They can also manipulate the price higher using similar techniques, but often these methods are used to bring the price down rather than up when an imbalance is perceived to the down side after a parabolic move such as BTC has experienced recently. For publicly traded stocks, this kind of behavior is closely monitored and potentially not allowed. In a market that is much harder for regulators to understand like BTC, it is much less likely that these types of price manipulation techniques would create the risk of regulatory action.
For cryptocurrencies in general, the introduction of regulation is more likely regardless of what happens with futures trading because the markets are now in the hundreds of billions of dollars. Governments have no choice but to get involved with something that has grown so large. The Fed is already expressing concern internally about the rapid growth of these markets. Regulatory certainty, as opposed to the current situation in which it’s unclear what are the rules, would be beneficial to crypto markets and to crypto offerings both for companies as well as currencies like BTC and ETH. If market players know the rules, more money is likely to be willing to get involved with crypto in its various forms.
- Bharath Rao, CEO of Leverj, a decentralized exchange for cryptocurrency derivatives
Cryptocurrency futures are now mainstream, with Nasdaq jumping into the ring. I expect a full suite of derivatives offered by the traditional markets that enable institutions to craft specialized crypto products for their customers. I also expect that non-custodial derivatives will be the platform of choice for both institutions and retail due to the combined benefits of both decentralized and centralized systems.