Category Archives: Chicago Board Options Exchange

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Fiat Pairs Outgunned by Crypto-to-Crypto Trading

A new cryptocurrency exchange review has reported that crypto-to-crypto exchanges out-peaked fiat currency pairs between mid-September to mid-October of this year.

CryptoCompare’s October 2018 Exchange Review records average trading volumes of exchanges offering crypto-to-crypto trades peaked at USD 7 billion a day compared to fiat currency pair volumes only hitting USD 4 billion, showing that pure crypto exchanges have been leading spot trading volumes. BitMEX has been accounting for about 90% of Bitcoin futures trading volume.

In terms of actual numbers, the balance of those exchanges offering fiat pairs and pure crypto-to-crypto trading is fairly equal, currently standing at 63 to 61 but with the spread of trading volume at over 2-1 in favor of pure crypto trading.

Binance CEO Changpeng Zhao suggests that fiat exchanges take longer to set up as some aspects are reliant on exterior forces beyond their control such as banks accounts and fiat gateways. Zhao remarked, “It’s a lot more tricky than pure crypto because, with pure crypto, we control everything; the blockchain does not reject us.”

Elsewhere in the report, it was noted that regulated exchanges such as the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) had returned relatively low Bitcoin futures trading volumes and that BitMEX and BitFlyerFX had averaged just under a quarter of trading volume with BitMEX representing over 90% of the futures market.

South Korean exchange Bithumb has seen a surge in trading volumes after the recent BK Global Consortium takeover. With daily trading volume near USD 400 million, it is the sixth-largest in the world behind Binance, OKEx, Huobi, Bitfinex, and Upbit. A total of 37 different cryptocurrencies are traded on the exchange. The report also indicates that BTC to Korean Won (KRW) trading now represents a tenth of the total Bitcoin trading volume among the top five fiat currencies.

The Intercontinental Exchange (ICE), which operates 6 clearinghouses and 12 stock exchanges including the New York Stock Exchange (NYSE), has announced that physical Bitcoin futures will go live on 12 December 2018 on their first crypto exchange, Bakkt. Physical Bitcoin futures could lead to the long-awaited rally major rally driven by institutional investments.

 

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Futures Launch Added to 2017 Bitcoin Slump, Says Fed

Three Federal Reserve Bank of San Francisco researchers and a finance professor from Stanford University are in agreement that it was the marketplace futures launch in 2017 which gave rise to the dramatic slump in the price of bitcoin, according to Coindesk.

The Federal Reserve paper describes Bitcoin’s December 2017 fall from a USD 20,000 peak as no “coincidence” pointing out that it was consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.

The researchers pointed out that such markets, namely the launch of Bitcoin futures, played a significant role in the slump, and could be viewed as similar to the US housing bubble which developed in the during the 2000s. In this case, mortgage-backed securities were also susceptible to optimistic and pessimistic traders.

The researchers explain:

“And until December 17, those investors [optimists] were right: As with a self-fulfilling prophecy, optimists’ demand pushed the price of Bitcoin up, energizing more people to join in and keep pushing up the price. The pessimists, however, had no mechanism available to put money behind their belief that the Bitcoin price would collapse. So they were left to wait for their ‘I told you so’ moment.”

It was at about this time, at the end of 2017,  that the Chicago Board Options Exchange and the CME Group, the world’s leading derivatives marketplace, gained approval for Bitcoin futures trading from the Futures Trading Commission (CFTC). The price of Bitcoin fell to just above USD 6,000 by late February 2018.

Such pricing dynamics, researchers argue, refers to a trend where demand for a financial instrument is initially driven by optimists who push up the price until the point where the market introduces a mechanism that allows pessimists to invest reversely.

The New York Times has reported that the Intercontinental Exchange, owner of the New York Stock Exchange, could become the latest bank to offer bitcoin futures, stating:

“[ICE] has had conversations with other financial institutions about setting up a new operation through which banks can buy a contract, known as a swap, that will end with the customer owning Bitcoin the next day — with the backing and security of the exchange.”

 

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