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CME Bitcoin Futures Briefly Broke $10,000 Amidst a New Open Interest All-Time High

Bitcoin futures briefly exceeded $10,000 on the Chicago Mercantile Exchange for the first time since early March 2018.

Bitcoin (BTC) futures on the Chicago Mercantile Exchange’s (CME) briefly broke $10,000 on Friday, June 21, according to data from trading analytics platform TradingView.

CME bitcoin futures 24-hour chart. Source: TradingView

CME bitcoin futures 24-hour chart. Source: TradingView

BTC futures reached a new high for 2019 of around $10,050, breaking $10,000 for the first time since early March 2018, when bitcoin was trading above $11,000 per coin.

The new 2019 record has grown in line with the new highs of CME bitcoin futures total open interest (OI) that has reportedly reached around $273 million after CME reported new all-time high of 5,311 contracts totalling $256 million earlier this week. At the time, CME stressed that the OI spike came amid increased popularity from institutional investors.

Open interest rate on CME bitcoin futures. Source: ZeroHedge

Open interest rate on CME bitcoin futures. Source: ZeroHedge

A Bitcoin futures contract is an agreement to purchase or sell bitcoin on a specific future date at a specific price. CME Group became the second global exchange to list bitcoin futures for trading back in December 2017, a week after the launch of BTC futures by the Chicago Board Options Exchange (CBOE). In March 2019, CBOE announced that they will not add a new BTC futures market, citing re-evaluation of its approach to trading digital assets.

Meanwhile, CME has seen notable growth in bitcoin futures trading on its platform recently, having recorded a new all-time high in the number of open contracts in early June. Earlier in May, CME reported that it was about to record the biggest trading month for BTC futures trading.

While BTC futures trading on CME surpassed the $10,000 mark, bitcoin’s price has been firmly approaching the same threshold recently. At press time, bitcoin is trading at $9,862, slightly down from the intraday high of $9,893.

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ErisX’s Spot Market: More Institutional Participation and Regulatory Oversight Coming to Crypto?

ErisX’s spot market could increase institutional participation — as well as regulatory oversight.

United States-based cryptocurrency exchange ErisX recently announced the public launch of its spot market trading, a move that takes the company a step closer to its goal of being a one-stop shop for the trading of spot and futures contracts in a regulated environment.

Per the information on its product page, ErisX will support dollar trading pair with bitcoin, bitcoin cash, ether and litecoin — in addition to bitcoin trading pairs with the other three cryptocurrencies.

What’s ErisX’s plan in the crypto space?

Since 2017, ErisX has been building a trusted market infrastructure to support the institutional adoption of cryptocurrency.

The Chicago-based company wants to make it possible for players in the capital market to have access to digital assets in the same way — and perhaps at the same venue — that they access traditional financial products like securities. Just before the end of April, there were reports that TD Ameritrade, which has some 11 million retail clients, has been testing ErisX’s crypto exchange and could soon offer crypto trading on its platform, where clients already trade traditional financial products.

Beyond crypto spot market, which is what most existing crypto exchanges offer and is also what ErisX’s spot trading is about, ErisX plans to launch a derivatives exchange once the U.S. Commodity Futures Trading Commission (CFTC) approves its application to operate both a derivatives exchange and a clearing house.

As a quick refresher, a spot market is a trading venue — digital or otherwise — where financial instruments such as securities, commodities and currencies are traded for on-the-spot delivery. Delivery means the exchange of cash for the financial instrument in question. Therefore, a crypto spot market would be any venue, such as exchanges, where you can instantly trade cryptocurrencies.

How will the ErisX platform work?

Trading on the ErisX spot market will work pretty much like existing exchanges like Coinbase. Users will need to go through Know Your Customer (KYC), Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) compliance checks before they’re able to use ErisX’s platform. Traditional brokerage firms already do this when onboarding users that trade through brokerage platforms and may not have to repeat the process.

Like other U.S.-based crypto exchanges, ErisX has licenses that make it possible for it to support the trading of a USD/crypto pair.

Why is ErisX attracting institutional investors?

Following the closing of the third round of Series B funding, which the company announced alongside the launch of its spot market exchange, ErisX has now raised a total of $47.5 million from 22 investors, according to business information platform Crunchbase.

These investors — which include TD Ameritrade, DRW Holdings, CBOE, TradeStation and Nasdaq, just to name a few — are interested in ErisX for a few reasons, all of which sum up to the fact that they see promise in how the crypto exchange is building a robust, transparent, integrated and regulatory-compliant market infrastructure in the crypto space.

TradeStation, an American online securities and futures brokerage company, invested in ErisX because it believes ErisX is bridging the gap between the traditional and crypto market. John Bartleman, president of TradeStation Group, in a press release, said:

“TradeStation is actively working to help bridge the gap between traditional markets and crypto markets. Our investment in ErisX supports further advances in the crypto market structure and will help bring more established players into the space. Supporting firms like ErisX, that understand regulation and markets, benefits the crypto ecosystem.”

TD Ameritrade, on the other hand, has seen increasing demand for the trading of crypto products from its retail customers. So, the American brokerage firm invested in ErisX because it sees the crypto exchange operator as a viable avenue to offer its customers access to the crypto market in a transparent way. Tim Hockey, CEO of TD Ameritrade said:

“As investors in ErisX, as well as a strategic contributor in the initiative, we are looking forward to advancing our innovation goals by working with an established, CFTC-regulated exchange that will include digital asset futures and spot contracts on a single platform.”

Steve Quirk, executive vice president of Trading & Education at TD Ameritrade, added that:

“Our retail clients are seeking to access and trade digital currency products in the same way they do with traditional capital markets — through a legitimate, regulated and transparent exchange. That’s precisely why we chose to invest in ErisX — to make digital currency products more accessible to retail clients.”

While U.S.-regulated exchanges including Coinbase and Gemini already offer institutional trading products in some ways, their services don’t cover the extensive needs of institutional investors. Institutional investors typically use leverage tactics to hedge or optimize their portfolio returns through derivatives. Some popular derivatives include futures, options, swaps, warrants, and contracts for difference.

U.S.-based derivatives market operators CBOE Global Markets and CME Group were the first to offer cash-settled crypto futures. While CBOE discontinued its bitcoin futures offering in March, industry market intelligence provider Diar pointed at volume data to suggest that CBOE was struggling to compete adequately with CME. CME continues to offer bitcoin futures, with volumes reportedly growing on a monthly basis.

However, investors and traders want a futures market for physical bitcoin settlement.

In this context, physical bitcoin is the same thing as the bitcoin in your wallet. “Physical” is only a relative term to indicate that actual bitcoin is being traded for cash, as opposed to trades where only cash is changing hands based on the price of bitcoin.

During a meeting with the CFTC on Feb. 14, 2018, Richard Gorelick, the head of market structure at the trading firm DRW, said:

“We continue to have concerns that the way these futures contracts are pegged to these cash markets, which are less transparent, could result in dislocations in the future. We’ve expressed our view that we would like to see physically settled cryptoasset contracts to help deal with some of these concerns.”

Cointelegraph had reported in June 2018 about possible manipulation of bitcoin prices for gains in the bitcoin futures market. In addition to the risk of manipulation, contracts are inefficient for professional traders who also actively trade cryptocurrency.

Garrett See of crypto trading firm DV Chain told the Business Insider:

“If they are physical delivery futures, then I know exactly what my P&L [profit and loss] will be if I hold it to expiration. If they’re cash settled, I have to make another trade to unwind the spot position at expiration and I have to hope that I can unwind my position at the expiration price (including fees) even though I may not have the ability to trade on the exchanges that are being used to determine settlement price.”

The futures products for physical settlement being developed by ErisX — as well as by its competitor, Bakkt — will meet the needs of institutional investors.

Bakkt is a crypto exchange platform being developed by Intercontinental Exchange, the parent company of the New York Stock Exchange. Similar to ErisX, Bakkt is developing both crypto spot and futures market. Beyond creating a market infrastructure that attracts institutional players, Bakkt wants to build and develop crypto use cases, according to Bakkt’s chief operating officer Adam White.

Following Bakkt’s announcement of a futures market for physical bitcoin settlement last year, See told Business Insider:

“If bitcoin is trading at a discount in the spot market relative to the futures market, a trader can go long bitcoin and short the future for a profit. This is hard when a future settles in cash because it requires a trader to make another trade.”

A more transparent crypto spot market

The CFTC last year reportedly requested trading data from top exchanges, following reports that the spot market might have been manipulated for gains in the futures market.

The introduction of even more advanced futures products, like the ones ErisX and Bakkt are working on, could result in more regulatory oversight of the spot exchange operators. The increased attention could, in turn, drive the exchanges toward maintaining the best and most transparent exchange practices.

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Hodler’s Digest, March 11–17: Top Stories, Price Movements, Quotes and FUD of the Week

In this week’s Hodler’s Digest, Jay Clayton may not consider ETH to be a security, but the CBOE is over BTC futures contracts for now.

Top Stories This Week

U.S. District Attorney Charges OneCoin Founders With “Billions” in Alleged Fraud

The founders of international cryptocurrency pyramid scheme OneCoin have been charged by a United States district attorney. Both Konstantin Ignatov and his sister Ruja Ignatova were reportedly arrested on March 6 in Los Angeles after being accused of “wire fraud, securities fraud, and money laundering offenses” after luring investors into putting billions of dollars into the fraudulent OneCoin cryptocurrency. The crypto organization — established in 2014 and based in Sofia, the capital of Bulgaria — works as a marketing network in which members receive commissions for attracting potential buyers to buy into the cryptocurrency, with reportedly over 3 million members globally.

U.S. SEC Chairman Jay Clayton Confirms ETH Is Not a Security

Jay Clayton, the U.S. Securities and Exchanges Commission (SEC) chairman, has reportedly confirmed that Ethereum (ETH) and cryptocurrencies similar to it do not qualify as securities. Citing a letter written by Clayton in March, nonprofit crypto research organization Coin Center reported that Clayton has agreed that a digital asset’s definition as a security is “not static” and can change over time. While Clayton does not mention ETH directly, he states that he agrees that a digital asset transaction may not represent a security if the purchasers no longer expect a group to carry out entrepreneurial efforts.

Cryptocurrency Community Eyes Tether After Website Dilutes USD Backing Claims

Stablecoin Tether (USDT), which has always claimed to be backed 1:1 to the U.S. dollar, drew scrutiny this week from the crypto community when the description of its holdings on its website was subtly changed. A new update to the site, date unknown, now reads that each tether is backed by its reserves, which, “from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.” Tether has previously faced criticism due to their lack of an official audit, although bank documents from the entity last fall had seemingly confirmed the validity of Tether’s backing claims.

CBOE Will Not List Bitcoin Futures in March, Cites Need to Assess Crypto Derivatives

The Chicago Board Options Exchange (CBOE) will not add a new Bitcoin (BTC) futures market in March, the firm said this week in a statement. According to the CBOE, the entity is re-evaluating its approach to how it handles trading digital assets, noting that it does not intend to currently list additional BTC future contracts for trading. The contracts that are currently listed will expire in June, and CBOE noted that those futures are still available for trading. The CBOE had launched Bitcoin futures in December 2017, a move closely followed by the Chicago Mercantile Exchange (CME).

U.S. State of Colorado Passes Crypto Exemptions Bill Into Law

Jared S. Polis, the governor of the state of Colorado, has signed the “Colorado Digital Token Act” into law this week. The legislation, which had initially been proposed in January and sponsored at the state Senate level by Republican Jack Tate and Democrat Steve Fenberg, allows for limited exceptions for securities registration and traders, including salesperson licensing requirements for those dealing in digital tokens. According to the language of the bill, a digital token is a digital unit that is secured through a decentralized ledger or database, and can be exchanged for goods or services and transferred without an intermediary.

Winners and Losers

The crypto markets are slightly up at the end of the week, with Bitcoin trading at around $4,031, Ethereum at $140 and Ripple at $.32. Total market cap is around $139 billion.

The top three altcoin gainers of the week are ZenGold, Ormeus Coin and SounDAC. The top three altcoin losers of the week are Freicoin, Indorse Token and MFIT Coin.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“With anything that’s not financial, chances are there is some internet thing that does what you want, that’s just centralized. So it’s a bit of a harder pitch.”

Vitalik Buterin, Ethereum co-founder

“I think artists in the music industry on average capture about 11 or 12 percent of the value in the industry and those big record companies are sucking up 70 or so percent. We can replace those record companies with smart contracts on the Ethereum platform.”

Joseph Lubin, Ethereum co-founder and ConsenSys creator

“I think, again, these markets could regulate themselves if we lived in a world where we allowed that.”

Hester M. Peirce, commissioner at the U.S. Securities and Exchange Commission (SEC)

“I think Bitcoin is a technology rather than business opportunities.”

Justin Sun, CEO of blockchain developer network Tron

“I think this technology has and is already demonstrating pretty significant promise, but it’s demonstrating significant promise in the places where it’s consistent with our approach to capital raising in the past.”

Jay Clayton, U.S. Securities and Exchanges Commission (SEC) chairman

Prediction of the Week

Bitcoin Price Breakout Scheduled for August, Says Fundstrat’s Tom Lee

Thomas Lee, the co-founder of Fundstrat Global Advisors, said this week that he thinks that a Bitcoin bull run could return in the next six months, even after his December declaration that he would not give out crypto price predictions. Speaking in an interview this week, Lee noted that traders should look out for the 200-day moving average, adding that if Bitcoin can hold above $4,000 and crosses its 200-day moving average in August, “the outside window is five to six months before Bitcoin starts to look technically like it’s back in a bull market.”

FUD of the Week

Bloomberg: Key Indicators Show Bitcoin Price Could Be Losing Steam

Bloomberg reported this week that key price movement indicators have shown that Bitcoin could be heading toward another downward move. According to the report, the technical gauges that signal long-term purchasing demand for BTC are deteriorating, which means that buying pressure could increase. Bloomberg notes that the main crypto’s Moving Average Convergence/Divergence (MACD) indicator — which follows the relations between two moving averages of the price of a security — has been moving downward since mid-February. Mati Greenspan, a senior market analyst at eToro, suggested that people are moving away from Bitcoin to altcoins.

Ledger Discloses Five Reported Vulnerabilities in Two Models of Trezor Hardware Wallets

Major hardware wallets manufacturer Ledger released information this week about five vulnerabilities in its direct competitor Trezor’s devices. These were found by Ledger’s Attack Lab, which hacks into both its own and others’ devices in order to find security weaknesses. According to Ledger, both the Trezor One and Trezor T wallets face problems with the possibility to backdoor the devices with malware, as well as using side-channel attacks to guess the PIN value. Trezor has responded, noting that the vulnerabilities are not critical as they cannot be exploited remotely and all require physical access to the device.

Bitcoin Pioneer Jeff Garzik Subpoenaed in $4 Bln Lawsuit Against Craig Wright

A U.S. District Court has subpoenaed Jeff Garzik, a software engineer and Bitcoin pioneer, in relation to the $4 billion lawsuit against Craig Wrightself-proclaimed Satoshi Nakamoto. The suit, filed last February with the family of computer scientist David Kleiman, alleges that Wright stole up to 1.1 million BTC after Kleiman (rumored to be one of the original BTC developers) passed away. After Kleiman’s death in 2014, Wright had contacted the estate with the stated intention of helping to dispose the Bitcoin fortune, with Kleiman’s family now claiming that Wright did not return the funds.

Best Cointelegraph Features

The Tipping Point: Kroger, Starbucks May Ignite Retail Crypto

In this dedicated analysis, Cointelegraph looks at how big institutions like Kroger and Starbucks, which have shown an interest in cryptocurrencies, have paved the way for hope that crypto could eventually be integrated more seriously into retail payments.

Textbook Case of Crypto Hype: How Iced Tea Company Went Blockchain and Failed Despite a 289 Percent Stock Rise

During the crypto hype in 2017, a former iced tea company decided to change its name to include the word “blockchain,” seeing an immense jump in stock price even though the actual company had little to do in the crypto space. Cointelegraph examines what exactly Long Blockchain Corp. is doing after only recently leaving the beverage business.

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CBOE Will Not List Bitcoin Futures in March, Cites Need to Asses Crypto Derivatives

The Chicago Board Options Exchange will not add a new Bitcoin futures market his month.

The Chicago Board Options Exchange (CBOE) will not add a new Bitcoin (BTC) futures market in March, the firm said in a statement on March 14.

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.

In December 2017, CBOE launched Bitcoin futures trading, followed closely by its competitor, the Chicago Mercantile Exchange (CME).

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 [2018], just prior to the collapse…”

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WSJ: Bitcoin Trading at Strong Correlation with Gold as Traditional Investors Step In

A Wall Street Journal has suggested that Bitcoin’s correlation with “traditional” assets markets has been high in recent days.

A Wall Street Journal (WSJ) article published today, Dec. 28, suggests that Bitcoin (BTC)’s correlation with traditional assets markets has been high in recent days.

Citing data from research firm Excalibur Pro Inc., the WSJ states that the top cryptocurrency has traded at a 0.84 correlation to gold over the past five days, where -1 indicates complete inversion and +1 perfect correlation. Moreover, Bitcoin has traded at a 0.77 correlation to the Chicago Board of Options Exchange’s Volatility index (VIX), a benchmark index for the United States equity market volatility.

While the WSJ frames the strong correlation between traditional markets and what the article dubs as the rebellious first cryptocurrency, Bitcoin, as something of an unexpected twist of fate, the article also offers several explanations as to why the pattern may have formed.

The first is the reported influx of institutional money into the crypto space, with the WSJ citing the growth of Grayscale Investments’ over-the-counter exchange-traded fund (ETF), the Bitcoin Investment Trust, as a prime example.

As per the article, the trust saw $51 million in assets under management (AUM) during its first year (2013). By the end of 2017, in the midst of the crypto market bull run, AUM had surged to around  $3.5 billion. As of recently — due to the so-called “crypto winter” — the trust reportedly retains about $900 million AUM.

Another factor proffered is venture capital (VC) investment. The WSJ reports that whereas in 2013, VC investment in Bitcoin and the blockchain sector was at around $96 million, this grew to $500 million in 2016 and to over $2 billion in all-time VC crypto investment through the end of 2017. The WSJ gives no fresh data for 2018.

As the article notes, a pull factor for traditional capital into crypto is the building of trading services and infrastructure with high regulatory compliance; the advent of crypto futures trading, and attempts to gain broad acceptance for crypto-based ETFs.

As reported, the crypto space continues to undergo far-ranging transformation; major developments on the horizon include the launch of the Bakkt Bitcoin futures exchange from Intercontinental Exchange, the launch of investment giant Fidelity’s digital assets business, and the continued influx of stalwart investors such as Yale, Harvard and Stanford Universities.

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Ethereum (ETH) Futures Rumors Mount, As CBOE’s Bitcoin Foray Turns One

CBOE’s Bitcoin Foray Turns One

As noted by Tom Hearden, a senior trader at Skylands Capital, subsequently relayed through MarketWatch, one year and one day ago, the Chicago Board Options Exchange (CBOE Global Markets) made history, becoming one of the first financial institutions to launch a fully-fledged Bitcoin (BTC) product.

Now that crypto is in the midst of a bear market, might as well look back and reminisce… right?

This instrument was, of course, a BTC-backed futures contract that became an industry hot topic near-instantly. Still, in Ethereum World News’ original report on the matter, which seems decades old now, community members divulged that they were dissatisfied with the product’s launch, as the Chicago-based institution’s webpage crashes just eight minutes after the launch of the first bonafide BTC futures. Yet, during that day in history, December 11th, 2017, BTC purportedly rose from $14,500 to $15,700 in minutes, presumably due to the influx of interest that speculators expected.

In fact, spot and futures BTC rose so fast that CBOE, likely inundated with queries from investors worldwide, had to halt trading on its market… twice. And now, amid the market lull, catalyzed by the absence of Bitcoin bulls, CBOE’s enamorment with halting trade is as apparent as ever. Case in point, the institution had to adjust its “Lower Price Limit” percentage twice, when the futures price hit $3,160, the year-to-date low.

Mati Greenspan spoke to the aforementioned financial media outlet on the matter of the Bitcoin futures, lauding them as a resounding success: He wrote:

They’ve managed to open up the market to users who otherwise wouldn’t have access, so in that regard, I think they have been somewhat of a success. Not only did they allow people to go long, but it opened up short selling to a wider audience.

While the eToro in-house crypto analyst painted the product in a good light, as it broadened Bitcoin’s horizons, MarketWatch noted that CBOE data indicates that the product failed to catalyze an unparalleled influx of institutional money.

Bakkt, Nasdaq, and ErisX To All Launch Bitcoin Futures

Although CBOE’s in-house crypto instrument might not have garnered boatloads of investment interest, there remain a number of firms looking to unveil futures for Bitcoin, and reportedly even Ethereum.

As reported by Ethereum World News previously, Bakkt, a diverse crypto startup partnered with the Intercontinental Exchange, Starbucks, and Microsoft, has the intent to launch a physically-backed Bitcoin futures product by January 24th, 2019, in an industry first.

ErisX, backed by TD Ameritrade, issued a similar announcement, seemingly aiming to undermine its rival in Bakkt. Not much is known about this venture, but many expect that it will offer a product roster that mirrors or somewhat resembles that of Bakkt.

Most recently, Nasdaq, the world-renowned financial institution, divulged that it is working in collaboration with crypto-friendly VanEck, to bring “crypto 2.0 futures” to market, with the firm presumably looking at Ethereum and Bitcoin as supported assets. Bloomberg has revealed that Nasdaq is planning to publicly embark on its first notable crypto foray by Q1 of 2019, pending a green light from the U.S. CFTC.


Ethereum Product Rumored

Even with all this hype surrounding Bitcoin-centric futures, a new contender is expected, if not slated to emerge into crypto’s alternative investment vehicle scene. This, if you haven’t guessed already, is Ether (ETH), the native asset of the “world computer” that is the Ethereum Network.

Just recently, the U.S. Commodities Futures Trading Commission (CFTC) hinted that it is looking into ETH. In a statement, the prominent American financial regulator claimed that it was seeking the public’s opinion on digital currencies, most notably Ethereum. In a public release, the somewhat crypto-friendly body wrote:

The RFI [Request For Information] also seeks to understand similarities and distinctions between Ether and bitcoin, as well as Ether-specific opportunities, challenges, and risks.

It is believed that the entity is seeking feedback to precede its ruling on an Ether-backed vehicle, such as purported Ethereum futures contracts backed by CBOE. Yet, a number of crypto commentators recently took to Twitter to allude to the theory that if Ethereum-backed futures, even a non-physical instrument, goes live, the aforementioned blockchain’s native asset may actually fall, due to “rehypothecation” — a common sight in traditional financial industries.

Confetti Title Image Courtesy of Jason Leung on Unsplash

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