The crypto wild west may not be wild for much longer.
Bakkt, a futures trading platform backed by the owners of NYSE, launched on Monday with a media blitz. It claims to be the “first end-to-end regulated platform” and offers daily and monthly physically-settled futures contracts, meaning holders receive physical bitcoin upon contract expiry. (CME’s futures contracts are cash-settled).
Launch of the platform was expected to throw open the floodgates to institutional investors eager to profit from the volatility of bitcoin price. But initial trading for Bakkt’s monthly futures contracts has been disappointing. Still the platform’s launch is a sign of cryptoassets wending their way into regulated financial markets.
Bakkt’s launch at the week’s beginning was complemented by the awarding of a broker-dealer license to a subsidiary of Harbor, a securities platform. In the absence of details and understanding about cryptocurrencies, regulators have been wary of conferring approval on the asset class.
But Harbor’s license shows that it is possible to convince them about cryptoassets and could set a precedent for the likes of Coinbase and Gemini, which have similar ambitions, to win broker-dealer status. If that happens, then expect fierce competition between crypto exchanges for customers. Coinbase, which was considered among the most exclusive of exchanges earlier, has already begun adding more cryptoassets at a rapid clip and is reportedly getting into IEOs.
Meanwhile, cryptoasset action is now spreading to basketball courts. Brooklyn Nets point guard Spencer Dinwiddie divulged details of his offering for accredited investors to convert part of his contract into tokens. Not surprisingly, the NBA fired back with a warning that monetization of the contract using third parties, in this case the investors, is not possible. Dinwiddie is optimistic, however, and has said he plans to explain the contract’s architecture to league officials.
Bitcoin Price Comes Back to Life
One thing that would make futures and trading platforms more attractive is volatility in crypto prices because it translates to profits for traders and investors. And last week was a good one for those profits as prices in cryptocurrency markets, which had been on a slow burn, sizzled with volatility. For example, prices for Bitcoin fell by 9% in 30 minutes. Other coins followed suit as crypto markets shed $30 billion of their overall valuation in less than two hours.
As is often the case, no one seemed to know the reason. Some said it was short-term technical analysis fundamentals at work. Others said it was Bakkt’s underwhelming launch. Still others said it was the liquidation of a short position at Hong Kong-based futures exchange BitMex. Either way, it was an opportunity for crypto twitter to erupt in exhortations to purchase the asset.
Meanwhile Facebook’s Libra continued to generate news. In response to a query from the finance spokesperson from Germany’s far left party, the company revealed that Libra’s reserves, which will ensure its stability, would consist of the US dollar (50%), Japanese Yen (14%), British Pound (11%), and the Singapore dollar (7 %).
Regulators are still concerned about the cryptocurrency, though. Rep. Maxine Waters (D-CA) reiterated her concerns about the cryptocurrency at a Congressional hearing earlier this week. There’s also the question of Libra’s status within the existing regulatory framework. While he refused to comment on the specifics of a classification, SEC Chairman Jay Clayton told Congressional Representatives that Libra “sounded” like a security.
Meanwhile, crypto crime continued apace. Also, messaging app Kik, which is battling the SEC, shut down its operations. But its founder Ted Livingston vowed to fight on and said their efforts were now focused on growing the ecosystem for Kin, the token at the center of their fight with the SEC.