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Morgan Stanley to Offer Clients Bitcoin Derivatives Trading

American multinational investment bank Morgan Stanley is reportedly planning to offer clients the chance to trade in Bitcoin derivatives, reports Bloomberg from an anonymous source.

The source, who claims to be close to the matter, shared with Bloomberg that the New York-based bank will be following in the footsteps of other Wall Street firms offering crypto-related services by dealing in contracts that give investors ”synthetic exposure to the performance of Bitcoin“. Investors will be given the option to go long or short using what is described as a ”price return swap”, with Morgan Stanley adding its own charge to each transaction that it facilitates.

Apparently, it is just waiting for enough institutional client demand and final approval for the internal processes to start offering these services, as the bank is already technically prepared for the Bitcoin trading.

While Morgan Stanley does not plan to trade in Bitcoin directly, the proposed services are tied to Bitcoin futures contracts. Any direct Bitcoin trading is unlikely to happen in the near future either, as CEO James Gorman has said customers will not be able to buy and sell directly through the bank.

Gorman has said, however, that the bank intends to build a cryptocurrency trading desk that will support derivatives of various digital currency assets. Andrew Peele, formerly of Credit Suisse Group AG, has been taken on by Morgan Stanley as head of digital asset markets to help institute this.

Goldman Sachs reaffirmed last week that it would not be abandoning its cryptocurrency trading desk, despite fake news report circling in the media. According to the firm’s chief financial officer Martin Chavez, the bank was even looking into expanding its crypto operations by launching a Bitcoin derivative.

Physical Bitcoin is not yet on the cards for Goldman Sachs yet, however, as Chavez explained: ”Physical Bitcoin is something tremendously interesting and tremendously challenging. From the perspective of custody, we don’t yet see an institutional-grade custodial solution for bitcoin, we’re interested in having that exist and it’s a long road.”

 

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Nasdaq to Trial Prediction Tool for 500 Cryptocurrencies

Nasdaq, second-largest exchange in the world by market capitalization, is planning to add a tool to the exchange which will aid investors to predict crypto price movement, according to unconfirmed reports.

A person familiar with the company’s plans has indicated that it will shortly be adding crypto assets to its new Analysist Hub. The Hub, launched in 2017, computes traditional asset market fluctuations drawing on social media and other sources.

Wall Street has shown interest in the cryptosphere over past months, with major banks making statements of intent, although Brian Kelly’s prediction that the addition of the New York Stock Exchange (NYSE) and Goldman Sachs to the crypto status quo would cause the market to surge, has yet to happen.

Bill Dague, Nasdaq’s head of alternative data, is guarded in his response to the suggestion that the exchange giant is about to take the same steps as some of Wall’s Streets other major financial institutions, and commented, “…given the abundance of interest, we are exploring cryptocurrency related datasets… Whether or not we launch a crypto-related product remains to be seen.”

On the other hand, Nasdaq’s source had a less guarded response, suggesting that the service would provide information on the movement of 500 crypto datasets using resources such as Twitter, and possibly StockTwits and Reddit.

Nasdaq CEO Adena Friedman had hinted earlier this year that Nasdaq had been looking into crypto-related products when she remarked:

“Certainly, Nasdaq would consider becoming a crypto exchange over time… I believe that digital currencies will continue to persist it’s just a matter of how long it will take for that space to mature.”

An article published in May on the Nasdaq website even cited three coins that the exchange felt might be able to withstand future market turmoil if it transpired: Bitcoin (BTC), Litecoin (LTC) and Stellar (XLM).

Nasdaq will need to move fast with its any crypto additions to its Analyst Hub, as news services Reuters and Bloomberg are already lining up with similar plans to launch a crypto analytic tool.

 

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Cboe President Still Hopeful for First ETF Approval

The race to receive the coveted spot as the first Securities and Exchange Commission (SEC) approved Bitcoin exchange-traded fund (ETF) continues and Cboe Global Markets Inc believes it still has a chance to make it.

Speaking to Bloomberg, Cboe’s exchange operator’s president and chief operating officer Chris Concannon said that it was a matter of working through the issues that concern the SEC before an ETF can be approved. He believes Cboe can achieve this but recognizes the growth of a strong Bitcoin futures market may mean that a futures-based ETF may come first, rather than an exchange for the cryptocurrencies themselves.

What Concannon sees potentially problematic here, however, is that a futures-based ETF has never been done before, and it could be a struggle to find enough liquidity. Futures trading volumes have remained low compared with commodities contracts such as gold, although an ETF would certainly prompt a significant increase in trades. The SEC is hesitant to approve such an ETF until futures trading can provide sufficient liquidity, however.

Concannon said that he had learned there have been more articles than volume, describing the amount of media attention the market gets compared to its size as ”shocking”. He noted that the entire cryptocurrency market was only a fifth that of multinational technology company Apple.

Cboe was the first company to usher Bitcoin into mainstream finance during its bullish run in December last year, offering futures contracts for the cryptocurrency. Many interpreted this as a signal Wall Street was turning in favor of Bitcoin, with an ETF finally becoming foreseeable.

The SEC cited the potential for market manipulation in the nearly entirely unregulated market as the primary reason to deny approval, as was the case in the Winklevoss brothers rejection. The SEC said that they would require a surveillance sharing agreement with a large Bitcoin exchange to ensure no manipulation is taking place, of which the Winklevoss Bitcoin Trust could not provide at the time.

 

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Bittrex to Offer Select Clients US Dollar Pairs

US-based cryptocurrency exchange platform Bittrex has confirmed a partnership with several financial institutions that will allow select clients in the US to pair BTC/USD, as well as connect pairs for ‘stablecoins’ Tether and TrueUSD.

As reported by Bloomberg, the agreement will allow for now predominantly corporate clients in a limited number of states to purchase the nearly 200 digital tokens offered on the platform, using the US dollar directly.

Bittrex is working closely on the deal with New York-based Signature Bank alongside several other financial firms. Signature Bank will be responsible for holding the dollar-denominated funds.

Banks, regulations cryptocurrencies

Bittrex CEO Bill Shihara recently commented on the impact he suspects that this will have on the relationships between banks and cryptocurrency.

”It’s been a long path. It’s not just about banks being able to trust Bittrex. It’s about banks being able to trust crypto in general. And I think it’s really showing that crypto is turning the corner in terms of mainstream acceptance,” he said.

Purchasing cryptocurrencies directly with fiat currencies is becoming increasingly difficult as anti-money laundering (AML) regulations and know-your-customer (KYC) policies are being enforced by a growing number of governments.

These policies have in part contributed to a negative reputation that the cryptocurrency industry is paired with, disincentivizing many predominant financial institutions from offering related services for fear of risking their reputation.

While that is changing (notably Goldman Sachs announced earlier this month they are launching a Bitcoin trading desk), Bittrex’s actions are an important step in moving away from platforms that offer only ”crypto-to-crypto” services, meaning no fiat currency is involved in transactions.

Bittrex has confirmed that it plans to extend the offering to retail customers in the foreseeable future.

Several other banks have administrated similar deals. Prominent US cryptocurrency exchange Coinbase has reportedly developed close working relationships with Cross River Bank, Metropolitan Bank and Silvergate Bank in the US, recently securing a Barclays PLC bank account in the UK.

 

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US Department of Justice Opens Criminal Case into Bitcoin Price Manipulations

The US Department of Justice (DOJ) has opened a criminal investigation into whether traders are manipulating the price of Bitcoin and other cryptocurrencies, according to a report published Thursday by Bloomberg.

The most notable concern coming from the DOJ relates to a suspected potential that the volatility of the market creates an opportunity for investors to push price valuations in a way to favor themselves.

Additionally, authorities feel cryptocurrencies are particularly susceptible to fraud due to a concern over the lack of regulations, as well as skepticism that every exchange actively pursues those deceiving the rules of the platform.

Spoofing and wash trading

People familiar with the situation told Bloomberg that the DOJ is specifically looking into spoofing and wash trading from colluding traders. These two illicit tactics are forms of market cheating that have been combated by regulators in the futures and equity markets for years.

Spoofing involves a trader submitting a number of orders, then cancelling them once they are satisfied they have affected the prices enough in the desired direction.

Wash trading involves a cheater creating trades with themselves to create a false impression of market movements, which influences others to move in a specific way.

It was reported that both Bitcoin and Ether are being investigated for this, but the DOJ declined to comment on the case at Bloomberg’s request.

Protecting investors

After a Bitcoin price surge last year spanning between USD 1,000 and USD 20,000, the cryptocurrency industry has found a host of new supporters and investors. The number of ICOs has also skyrocketed, with a growing number of people aware and involved with altcoins.

Regulators across the globe are now seeing the industry as a growing concern, as investors enter the market without a clear understanding of what cryptocurrencies are, and the risks involved.

Cryptocurrency exchange platforms operate internationally, with many remaining unregistered with any government agencies, leading to a heightened fear of fraudulent activities in general.

Of course, the vast majority of platforms maintain there own strict security measures to protect users and are willing to pursue fraudsters, if not only to protect their own reputation.

 

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Analyst Mati Greenspan Remains Bullish on Bitcoin as Wall St Builds Blockchain “Bridge”

In a recent Bloomberg broadcast, Mati Greenspan, eToro senior market analyst, saw positive signs for cryptocurrency, saying that the market was about to receive a new flow of liquidity from Wall Street.

Among many issues faced, volatility may not be one that Wall Street giants are used to but Greenspan says it has been in a consistent state of play since the very beginning.

He said,”The dip we’re talking about is actually nothing new for Bitcoin, as far as percentage terms go. If we look at it historically we’ve seen these type of pullbacks before, and definitely Wall Street is getting involved and they are building the bridges as we speak. Whether they go full on Bull or full on Bear, we don’t know, and they are ready to inject new liquidity into the market.”

Greenspan went on to explain that Wall Street missed the boat when it came to last year’s all-time high, with Chicago exchanges CBOE and CME launching Bitcoin futures right at the precipice in the Bitcoin high.

He reflected that the future of Bitcoin in the financial ecosystem would remain unknown, pointing out that the cryptocurrency operates as an individual entity, not part of the central banking monopoly.

Lightning Network

In December and January, the Bitcoin network experienced congestion due to the newfound popularity of the currency, inevitably causing some concern for the future of the coin.

Compared to two years ago when fees were next to nothing, the reporter commented that “it takes forever to get it through the system” during congested periods.

“Since then the price has come down, the interest has come down and right now if you were to send a transaction it would be instant, comparable to many years ago, this is why we need more liquidity in the market,” came the reply.

A new scaling proposal is currently being rolled out for Bitcoin in the shape of the newly-developed Lightning network protocol. It effectively creates a layer on top of the blockchain, enabling fast and cheap transactions which can settle payments off the blockchain.

 

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Video: Bloomberg Summit – The Great Bitcoin Debate

Video: Bloomberg Summit – The Great Bitcoin Debate:

Ribbit Capital’s Micky Malka (@MickyMalka) and Tangent Capital Partners Jim Rickards (@JamesGRickards) debate the pros and cons of bitcoin from the Bloomberg Link Next Big Thing Summit (#BBnbt).

 – http://bloom.bg/14gY4DT (Length: Five minutes)
 – http://bitcointalk.org/index.php?topic=237664.0 (Further discussion of the debate)

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