Bitcoin Futures And Their Impact On Cryptocurrency Market
The most expected events for the crypto money market in 2019 is the launch of bitcoin-ETF and bitcoin futures trading. This will give a green light to institutional investors, although not all market participants like this fact. The SEC was expected to rule on the bitcoin-ETF trading on February 27. But a month before the date, the VanEck and SolidX companies withdrew their application from the Commission. However, a new application was filed on February 1, and VanEck received the delay of up to 240 days.
Meanwhile, not only was the decision on bitcoin-ETFs postponed, but also the launch of the Bakkt platform specializing in the BTC futures trading. It was appointed on January 24, but then put off for an unknown period, even though the terms of trade were published by the company. Thus, there is a possibility that Nasdaq futures will enter the market a little earlier than the launch of the Bakkt exchange occurs.
First Bitcoin Futures
A bit of cryptocurrency history: the first bitcoin futures were launched in December 2017 on two exchanges: the CME — Chicago Mercantile Exchange, and the CBOE — Chicago Board Options Exchange. At that time, the market was growing rapidly, including due to the upcoming BTC futures launch. On December 10, they were added to the CBOE listing. On December 17, bitcoin price hit its historic maximum of almost $20,000. But the next day after the CME futures trading got started, the price began to fall. We all know what happened next: during 2018, the market experienced decline. As of February 2019, BTC price fluctuates around $3400.
Market participants have different opinions about what has a greater influence on the price of the first cryptocurrency — either general market trends or futures contracts. Some people are confident that the launch of futures trading has provoked a downward trend that has been observed for more than a year. On both stock exchanges — the CME and the CBOE — there are cash-settled futures traded. This means that a trader doesn't need to deal with bitcoins at all, all calculations are performed only in fiat, and both parties receive dollars onto the accounts. It opens up a bulk of opportunities for crypto money price manipulation, even more than when it comes to physical futures trading. In this case, according to the result of the executed contract, a buyer receives bitcoins, not fiat.
However, the research of the independent analytic company Cindicator showed that the trading volume of bitcoin futures is much smaller than the volume of the exchange and over-the-counter trading. According to Cindicator’s report called “Bitcoin Futures: Market Evolution” that takes into account the last year's data, the impact of futures on the crypto money market is insignificant.
Futures 2.0: What does the Nasdaq propose?
It's not yet known what type of futures the Nasdaq, one of the three largest US stock exchanges, will add to the listing. There is no launch date too, because the CFTC resolution hasn't yet been received. However, representatives of the company are confident that there will be no problems with this, so the start of trading is expected in the first quarter of 2019. It's known that the Nasdaq has a partner — a private investment corporation VanEck, which provides a bitcoin price index for stock exchanges. Gabor Gurbacs, VanEck's director of the digital assets strategy, noted, that the company aims to provide reliable data based on prices of several exchanges. It’s worth mentioning that the CME stock exchange uses index data from four trading platforms, while the CBOE uses only one — from Gemini. From this point of view, Nasdaq bitcoin futures may become less manipulative.
“We believe that 2018 was the year of regulation, and 2019 will be the year of implementation.”
Gurbacs focuses on the fact that VanEck uses new tools to ensure the control and safety of funds and obstacles to the manipulative trading tactics. This and active work with the CFTC shows that the partners are seriously determined to enter the market and fully comply with the requirements of the financial regulator.
As Joseph Christinat, the vice president of communications at Nasdaq, says, the company has done a lot of work and the launch of futures is a well-thought-out decision that won't be affected by a long downtrend. According to him, the company has been watching the cryptocurrency market history for the last five years. We have to admit that the words of the representatives of the companies sound encouraging. There isn't much time left till the end of Q1 2019. Soon we’ll find out whether the regulator will recognize the terms of trade as relevant, and how the market will react to the launch of bitcoin futures this time.