The Institutions are coming

CME and Cboe are about to launch Bitcoin Futures. This is a huge step for Cryptocurrency adoption as it opens the asset class to more sophisticated and institutional investors. The announcement has resulted in the price of Bitcoin to surge based off institutional perception and excitement. We too are excited, to see how the global players treat a young immature market, with only $344B to the entire class and $192B to the asset you can trade (Bitcoin).

Let’s take a hypothetical - you’re a seasoned futures trader with $100M ready to invest. Looking at the data you have two options. Option 1 - you invest for the future of BTC, because you believe in the long term value and general adoption, indicating the price will increase over the duration of your contract. Option 2 - you can see an opportunity to profit, this will be the first time large scale institutions can short futures, options and contracts.

CME and CBOE will need to find a scalable solution to settlement if the market explodes and the exposure to people not being able to pay is left on the settlement facility.

Our top 5 things to consider

  1. Futures can provide some stability to the volatility by restricting trades greater than 20% swing from the previous day.

  2. This is the beginning of a new wave of money coming into the Crypto markets.

  3. You never actually own any Bitcoins - the futures contracts are settled in cash based on a  Bitcoin Reference Rate as dictated by the major exchanges.

  4. Shorting becomes a real possibility and more accessible, through a stable, cost effective platform. (please note you can short at the moment with IG markets and exchanges)

  5. CME will launch on the 18th and Cboe on the 10th of December

 

Magnet’s take

The true value of Bitcoin is still unknown, as most of the greatest minds in Crypto discussed at Consensus last week, Bitcoin has a long way to go before reaching anything close to global adoption. There will be a few blips along the way, which any savvy long term investor have experienced over the last 4 years. This move will be positive in the mid/long-term but can lead to volatility in the short term. Magnet will be keeping a very close eye on trends, contracts and options.

 

Adoption

  1. US regulators have approved bitcoin futures trading on three exchanges. Bitcoin futures trading is set to commence on the 10th of December on Cboe, the 18th of December on CME and early next year on the NASDAQ.

  2. PwC has started accepting crypto asset payments for advisory services. The decision by the Hong Kong PwC office to accept this as a form of payment demonstrated how crypto assets are becoming more broadly accepted as a form of settlement globally.

  3. New York based rent processor ManageGo is preparing to provide users with the option to pay their rent in Bitcoin, Litecoin and Ether.

  4. Four Blockchain Bills have been introduced into New York Legislature. The Bills aim to establish legal language for the technology and create studies around its applications for the state’s government.

  5. The Government of Moscow is testing distributed ledger technology (DLT) in local municipal elections. In a global first, voting on a DLT will make it difficult to say administrators incorrectly interpret or change results when voters have the power to verify and audit information.

     

The Market

  • Bitcoin again reached a new all time high this week on the back of US regulators approving derivative trading in the coin

  • Other assets had a mixed week with most benefiting from the sentiment of Bitcoin.

Egor Sidelska