More than six months since ICE revealed its vision for Bakkt, the bitcoin futures market is still awaiting regulatory approval.
CME says it has “no changes” in store for its bitcoin futures contract, following retrenchment by rival Cboe.
The Chicago Board Options Exchange will not add a new Bitcoin futures market his month.
Per the statement, CBOE is re-evaluating how it approaches trading digital assets. CBOE said:
“CFE is not adding a Cboe Bitcoin (USD) (“XBT”) futures contract for trading in March 2019. CFE is assessing its approach with respect to how it plans to continue to offer digital asset derivatives for trading. While it considers its next steps, CFE does not currently intend to list additional XBT futures contracts for trading.”
The currently listed futures, XBTM19, will expire in June. CBOE notes that all currently listed futures are still available for trading.
Futures contracts give investors exposure to an underlying asset — in this case Bitcoin — without the need to actually own any. Instead, investors buy contracts that track the underlying price of the asset and speculate on whether the contract price will increase or decrease by its expiration date. In the case of the CBOE Bitcoin futures market, the difference is then settled in U.S. dollars.
Earlier this week, a report from Bloomberg stated that the Bitcoin price could be headed for another large selloff. Analysts said that key technical indicators such as the Moving Average Convergence Divergence had been moving downward since mid-February. Bloomberg analyst Mike McGlone said:
“The entire industry is ripe to resume a path to lower prices. Conditions are akin to November , just prior to the collapse…”
Physically delivered crypto futures exchange Coinflex has attracted two new key investors, Digital Currency Group and Polychain Capital.
In the same announcement, Coinflex introduced its FLEX Coin, which is designed to encourage liquidity and reward early traders on the platform. Traders will be paid a certain amount of FLEX based on the proportion of the volume they trade, relative to the total daily volume on the platform, the press release notes.
Coinflex CEO Mark Lamb stated in the press release that with the support of high profile investors, the company is “moving closer to our goal of helping crypto futures trading achieve its full potential.”
Claiming to be the world’s first physically-delivered crypto futures market, Coinflex is also planning to launch what it calls the world’s first stablecoin-to-stablecoin futures contract, the press release says.
Olaf Carson-Wee, CEO of Polychain, was quoted in the press release as saying that Coinflex, as an exchange for physically settled futures, “will be well positioned to capture significant order flow from speculators, institutional traders and Proof of Work miners seeking to hedge against crypto price volatility and hash rate volatility.”
As previously reported, physically delivered futures means that at the time of a contract’s expiration, traders will be given the underlying cryptocurrency instead of a cash payment.
Meanwhile, market giant the Intercontinental Exchange (ICE) has recently said that the launch of its crypto platform Bakkt, which is set to include Bitcoin futures trading, is expected later in 2019. Originally announced in August 2018, the digital asset platform’s launch was delayed due to ongoing consultations with the United States Commodity Futures and Trading Commission.
The operator of the New York Stock Exchange posted an update for the launch of Bakkt’s physically settled daily Bitcoin futures contract.
The document from ICE — the operator of the New York Stock Exchange (NYSE) and creator of digital assets platform Bakkt — states that “[f]ollowing consultation with the Commodity Futures Trading Commission [CFTC], ICE Futures U.S., Inc. expects to provide an updated launch timeline in early 2019 for the trading, clearing and warehousing” of Bakkt’s Bitcoin (BTC) futures contract.
The document reiterated that previously the firm had been targeting Jan. 24, 2019 as a launch date, but that the date “will be amended pursuant to the CFTC’s process and timeline.”
The statement also outlines the particular nature of Bakkt’s futures contracts, stating:
“The Bakkt Bitcoin (USD) Daily Futures Contract is a physically-settled daily futures contract for bitcoin held in Bakkt Warehouse, and will be cleared by ICE Clear US, Inc. Each futures contract calls for delivery of one bitcoin held in Bakkt Warehouse, and will trade in U.S. dollar terms.”
As Cointelegraph also reported today, Bakkt has completed its first funding round, raising $182.5 million from 12 partners and investors.
ICE initially announced the intention to create an “open and regulated, global ecosystem for digital assets” powered by the Microsoft cloud infrastructure this past August.
The founder of Galaxy Digital — a crypto investment firm that invested in Bakkt — cited Bakkt’s pending launch as one of the industry developments that could help turn around the downward trend in crypto markets this year.
The New York Stock Exchange–affiliated Bakkt completes its first fundraising round, with 12 partners.
It’s unlikely the CFTC will act in time for ICE to launch Bakkt as planned on Jan. 24, CoinDesk has learned.
The world’s second largest stock exchange Nasdaq has confirmed it plans to launch Bitcoin futures in the first half of 2019.
As reported, two insider sources had already leaked the plans to Bloomberg in late November.
Yesterday’s confirmation from Joseph Christinat, vice president of Nasdaq’s media team, clarified the launch remains subject to approval from the U.S. Commodity Futures Trading Commission (CFTC), although reportedly “there’s been enough work put into this to make [the question of regulatory approval] academic […] we’re doing this, and it’s happening.”
Christinat told the Express that the stock market giant has been eyeing the crypto space “for years” and has been working on its Bitcoin (BTC) futures product for “most” of 2018. He added:
“We’ve put a hell of a lot of money and energy into delivering the ability to do this and we’ve been all over it for a long time — way before the market went into turmoil, and that will not affect the timing of this in any way. No. Period. We’re doing this no matter what.”
Chrisinat’s interview did not confirm whether Nasdaq’s Bitcoin futures contract will be cash-backed, or physically settled (i.e. with returns paid out in BTC rather than fiat currency).
While cash-settled Bitcoin futures contracts came to market on CBOE and CME Group as early as December 2017, the first physically-delivered Bitcoin futures are targeted for launch in January 2019 on Bakkt, the digital assets platform created by New York Stock Exchange (NYSE) operator, the Intercontinental Exchange (ICE).
As reported, Nasdaq’s planned futures contract will purportedly be the first of a set of “transparent, regulated and surveilled” digital assets products to be jointly launched as part of its recently-announced partnership with U.S. investment firm VanEck.
VanEck is also currently awaiting a final decision from the U.S. Securities and Exchange Commission (SEC) on its joint proposal for a physically-backed Bitcoin exchange-traded fund (ETF) together with blockchain software and financial services firm SolidX.
Want to remove some of the volatility from your investments? Here’s a look at some of the traditional financial instruments making waves in the crypto world.
The crypto market has been brutalizing of late – but many traders don’t realize that there is a plethora of financial instruments out there. Each offer investors a new way to back crypto, without relying on the highs and lows of cryptocurrency prices in an erratic and volatile market.
But what are these alternatives – and are they really everything they’re cracked up to be?
In many cases, some of the new products emerging in the crypto market are iterations of services that have existed in the old-fashioned financial world for years. Bonds are a good example. These have been kicking around for more than 500 years – and back in 1694, they were issued by the Bank of England to fund a war against France.
How do they work? In essence, they are a fixed-income instrument that amounts to something of an “I.O.U.” Lenders give businesses the money that they need to achieve their aspirations, with borrowers usually receiving interest rate payments once per year until the full amount of the loan is due. When it comes to interest, this could fluctuate based on variable rates, or it may be fixed.
Bonds have already been gaining momentum – with the World Bank hitting the headlines back in summer 2018. On August 10, the first blockchain-based bond was issued by the biggest bank in Australia – Commonwealth Bank of Australia. This is not the first debt instrument to be issued through blockchain – with Spain’s BBVA signing a $117 million loan over the summer in a bid to benefit from the traceability and transparency of smart contracts.
The hope is that crypto bonds could enable blockchain-based businesses to generate money to grow – offering them an alternative from ICOs, which have had something of a torrid time of late. Although research in October suggested that more than $20 billion had been raised through initial coin offerings since the beginning of 2017, this has been slowing of late – with ICO funding for August 2018 ranked the slowest for 13 months.
Futures: The future?
These conversations have rumbled through right up to today, with the volatility seen in the crypto market showing no signs of abating. In brief, futures involve two parties agreeing to buy or sell cryptocurrencies at a previously agreed-upon price on a set date. Rather than being used as a mechanism that helps to boost profitability, futures are often relied upon as a way to mitigate risk.
Why is this a compelling financial instrument? Let’s say you believe that Bitcoin’s value is going to rise in the coming months. You can buy a three-month contract for one Bitcoin at the current price and receive it at contract’s conclusion. If the price of Bitcoin rises dramatically over those 90 days, you would be buying it at the same price, resulting in a tidy profit.
Of course, this instrument can work conversely. Let’s imagine that you bought Bitcoin at an optimal moment, but you think that the price is about to fall precipitously. Through futures, you have the opportunity to enter into an agreement where you sell the Bitcoin at its current price in three months’ time – and if its value tumbles, you pocket the profit. It’s fair to describe such behavior as a bet, as no one can predict where the market is going, but if you’re experienced and have insight into crypto movements, futures could prove indispensable.
So yes: futures can help traders shield themselves against the perils of fluctuation – and give investors in countries where crypto is banned a chance to get involved. That said, it isn’t without risks. Given the dramatic highs and lows seen in crypto in recent months, you could argue that futures are tantamount to gambling. Red or black?
There are other options
Puns can never let you down during a heavy feature that focuses on crypto financial instruments. If you don’t think that futures are the future, options are an option for you. These instruments mean that you have the right to buy or sell Bitcoins at a particular price when the options mature, but you are not obligated to complete the transaction. There is often a premium for using these financial services.
These dramatic shifts in the crypto market have sparked diversification by digital asset platforms – giving investors greater choice. Bonds, futures and options are beginning to flourish in the industry. For example, Bibox, an AI-driven exchange, has just launched bonds, aiming to give new opportunities to traders.
A slowdown in ICOs has meant that startups are looking for new ways to raise capital, while investors are on the lookout for new ways to protect and grow their assets. Whether derivatives gain momentum in 2019 is yet to be seen, but there’s no doubt that chatter surrounding financial instruments is on the increase.
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Bearish positions for non-commercial contracts of Bitcoin (BTC) futures are on the decline, according to the latest Commitments of Traders (COT) report released by the U.S. Commodity Futures Trading Commission (CFTC) August 24.
For the week ending August 21, the report shows that the net position on BTC futures declined by 1,266. Short positions fell by 210 contracts to 3,426 as compared with the previous week, with long positions up by 56 contracts at 2,160.
As shown by the negative total tally, the market is still overall net short, yet -1266 is a sharp turnaround from the -1926 recorded June 5th. The fresh data appears to reveal a trend away from bearish sentiment, bolstered by strong price performance on Bitcoin spot markets.
Speaking on CNBC last week, crypto analyst Brian Kelly cited statistics from CME exchange which suggested that the Bitcoin futures market overall is signalling both heightened demand and greater maturity:
“Here’s CME Futures open interest of large holders. [As of] April, you’re starting to see a big increase… about an 85 percent growth rate. If you extrapolate that out, by February 2019, you’re going to have a very robust market here.”
Kelly bolstered his claims that the U.S. Securities and Exchange Commission’s (SEC) likelihood of approving a Bitcoin exchange-traded fund (ETF) would come by February 2019, based on demonstrable growth in the Bitcoin derivatives market, alongside other factors. As Kelly noted, even the fresh spate of ETF disapproval orders has not lead the market to “sell off,” yet a further sign of market resilience.
Bitcoin (BTC) is trading around $6,743 at press time, up almost 1 percent on the day and almost 7 percent on the week.
Bitcoin’s 7-day price chart. Source: Cointelegraph’s Bitcoin Price Index