The future of the crypto trade are futures

The boundaries between cryptocurrencies and traditional asset classes are increasingly blurred because established wall street players are making the trade of digital assets into part of their main business-and Bitcoin-born in the mainstream markets.

The entry of institutional investors in the $ 1.3 trillion market for digital assets has led to the influence of large banks and professional dealers. As a result, the ratio between the price of mainstream systems such as stocks and bonds and bonds and crypto has intensified.

But so far, the majority of these established investors can only act with Bitcoin derivatives instead of with cash accounting, which has concentrated the influence of Wall Street on appointment markets and non-interceptual (OTC) contracts, such as: Available to the front '.

and this focus on derivatives has tightened the competition of the stock exchanges for a growing part of the world of digital assets.

The influence of professional traders on the market can already be felt, says Adam Farthing, Chief Risk Officer for Japan at the Market Maker B2C2.

In the past few weeks, the cryptocurrency markets have experienced one of their greatest market adjustments of all time after Tether, a leading stable coin that was to be evaluated in accordance with the US dollar had broken their bond with the currency. This sent a reverberation from the markets for digital assets and deleted trading positions worth billions of dollars.

Bitcoin and Ethereum, the two of the largest crypto tokens according to the market value, have booked double-digit losses since the beginning of the month.

However,

FARTHING notes that the price fluctuations in crypto futures were much more steamed than elsewhere, and the shifts between the stock exchanges-which can lead to arbitrary facilities-were lower than in earlier episodes of market turbulence.

"With all the mood around the cryptoma markets, it is worth noting that the futures markets are increasingly mature," says Farthing.

The latest volatility has also driven the trade in crypto futures contracts at the Chicago Mercantile Exchange (CME) at record heights, since professional traders are trying to restrict their trade in digital assets to a heavily regulated marketplace.

But private customers act even larger quantities of futures contracts per day on offshore exchanges that are less strictly regulated. These include FTX, Binance and Okex.

derivatives such as futures and options are attractive because they enable investors to bet on price movements within a previously agreed time frame, while they only invest a small fraction of their trades in advance. However, this ability to leverage trades increases the result, which means that the extent of potential losses is much larger.

With all the downturning mood around the cryptoma markets, it is worth noting that the futures markets are increasingly mature

For highly regulated institutions such as banks, futures are also easier to manage from a credit, compliance and legal perspective, since they do not include physical delivery of the underlying.

With these advantages, which now promote more professional trade in crypto futures, the stock exchanges run to become the largest in this market.

Competition between the stock exchanges by a piece of the digital coin The market has become tougher than ever - even if the cryptocurrency markets experience one of their greatest breakdowns of all time and the fears are increasing that a longer phase of low activity could affect trade income.

"Although the number of stock exchanges that the cryptom market can support is not so limited, it is likely that some main actors will develop over time," predicts Nicky Maan, Managing Director of Spectrum Markets, which offers securitized cryptodentivates to investors.

"I assume that we will have a clear growth [on Exchanges] compared to OTC in the next five years," he adds.

Traditional stock exchanges are also very interested in securing part of the lucrative crypto trade market after watching for years how their start-up counterparts in the field of digital assets harvest attractive rewards.

CBOE and CME were the first to introduce Termine Contracts on Bitcoin in 2017. Now the Swiss Börse Six and Eurex also offer types of derivatives.

At the same time, specialized crypto exchanges are slowly pushing into the heavily regulated US derivative markets. Among other things, they do this to satisfy demanding retail customers who want to trade products and contracts across all markets. But the leading crypto exchanges also have an eye on the traditional professional markets.

In the past few months, several crypto exchanges have taken over small traditional stock exchanges-to accelerate their push into conventional markets, especially in derivatives.

also new crypto exchanges are on the rise. According to CoinmarketCap, a data website, there are now 526 stock exchanges for trading cryptocurrencies, and some newer market participants have gained strength, especially those who are aimed at professional investors. Bullish, the platform, which is supported by a number of billions of hedge fund owners, has had a promising start since the end of last year.

"We brought Bullish onto the market for the Christmas season and today we have a Bitcoin trade volume of over $ 2 billion, the same amount as coinbase," says Tom Farley, Chief Executive from Bullish's purpose society, with which it will be the stock exchange later this year.

and some of the ideas that bring crypto exchanges to traditional markets are innovative. One is 24-hour trading, seven days a week-a schedule that is normal for computer-aided digital markets, but is strange even for foreign exchange trading, which only takes place five days a week.

other crypto initiatives are more controversial. Sam Bankman-Fried-billion-dollar owners of FTX, one of the largest crypto exchanges in the world-unsettled the faithful of the futures market by submitting a proposal to the US regulator that could displace brokers from the markets.

He argues that risk management should be carried out in all computers in all markets, just like with crypto. This proposal was not well received by brokers because it would practically assign them to them. The Commodity Futures Trading Commission (CFTC), the US regulatory authority for derivative markets, has initiated a consultation to the proposal, which could lead to large banks like Goldman Sachs to be excluded from the trade.

The CFTC is considering whether it should allow Bankman-Fried to sell levered crypto derivatives to small investors and to handle their business directly, which means that intermediate financial brokers are excluded from the process.

Although there is no fixed limit for the number of stock exchanges that the cryptom market can support, it is likely that some main actors will be developed over time

At Krypto this is already the norm, since most exchanges also act as brokers. They not only equalize trades, but also manage their customers' positions - which triggers some discomfort among the supervisory authorities about potential conflicts of interest.

Bankman-Fried's idea already has some fans, although the supervisory authorities still have to decide whether they agree with his proposal.

Chris Perkins, President of the Cooinfund investment management company, is because he came up with the idea.

When he worked at the US bank Citi, he headed one of the world's greatest futures intermediaries-exactly the kind of business that could close Banksman-Frieds proposal. "I spent my career building one of the most prominent regulated derivative companies in the world," explains Perkins. "I was the intermediary."

But after he has joined the world of cryptocurrencies, Perkins has changed his opinion. Mediator, he believes, should go. "I will be honest with myself and say, you know what: [Bankman-Fried] is right."

It remains to be seen whether the supervisory authorities agree to Perkin's conclusion.