Category Archives: LedgerX

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Binance: ETFs Not Core to Crypto Growth

ETFs Are Not Core to Crypto Industry’s Growth, Binance CEO Weighs In

A popular trend as the cryptocurrency industry develops is the introduction of the analogous derivative instruments of the traditional financial market, aimed at luring in institutional investors into the crypto world. One such instrument is the exchange-traded fund (ETF).

CEO of leading cryptocurrency exchange Binance, Changpeng Zhao, has, however, downplayed the role of ETFs in the growth of the crypto industry. He said: “If it [a Bitcoin ETF] is listed on a big traditional exchange… that does bring in a lot of attention from people outside our industry.”

In a live stream via Periscope on 6 February, Zhao attempted to draw the attention of crypto enthusiasts to a very important piece in blockchain development – entrepreneurs building real, and usable products.

Blame it on the bear

The bear market which started at the cusp of the last all-time high of Bitcoin hasn’t made it easy for crypto projects. Many startups last year faced developmental challenges and were either forced to abandon their projects or get absorbed by another. Now, lots of players in the industry have become highly dependent on these market derivatives being introduced.

First, it was Bitcoin futures introduced by CME Group and CBOE in late 2017, which helped drive the price of Bitcoin to a new high of USD 20,000. However, it didn’t last long. Suffice to say, it was an opportunistic glitch in the price dynamics of Bitcoin.

Secondly, speculations about another bull-run propelled by ETFs run deep in the crypto community. Perhaps similar trends are bound to occur with more derivatives being introduced into the sphere, however, without an established value-based blockchain ecosystem in place, the market could get dire once more.

ETFs or no ETFs

As of the time of writing, the US securities regulator, Securities Exchange Commission (SEC) has rejected nine ETF applications. Each was laden with similar bull run expectations from the members of the crypto community as many have speculated on the prices increase should the SEC give the green light.

Recently,CBOE, along with investment firm VanEck and financial services company SolidX, reapplied for a rule change to list Bitcoin ETFs after withdrawing it a week earlier.

With the ongoing fuss about Bitcoin ETFs, Zhao seems to think that with or without the ETFs, the industry will grow. A sentiment probably sparsely shared as focus on the real development of blockchain and its applications are fairly the driving motif for latter blockchain adopters.

Other derivatives are coming

Bitcoin News recently reported a new class of derivative instrument being introduced by US-regulated derivative platform LedgerX, which is essentially a binary wager on the next Bitcoin’s block-reward halving.

While derivatives may be an economic milestone for the crypto industry, the overall utility of blockchain applications and their gradual adoption by legacy systems adequately offset the economic benefits of derivate crypto markets.

 

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LedgerX Introduces Binary Wager on Bitcoin’s Next Halving Date

LedgerX Introduces Binary Wager on Bitcoin's Next Halving Date

US-regulated derivative platform LedgerX has announced the launch of a new class of Bitcoin derivative based on block-halving dubbed the LedgerX Halving Contract (LXHC).

So far, the larger part of cryptocurrency trading is based on financial instrumentation similar to those of the traditional market. However, as the blockchain and the underlying asset classes are an entirely new class of economic streams, developing new types of derivatives are expected, especially with the type introduced by LedgerX leveraging on the uniqueness of block formation and reward halving.

Bitcoin’s code has been programmed to halve block rewards every four years. So far, two block-halving events have occurred since the genesis block was created. The first was in 2012 when the block reward was halved from 50 Bitcoins to 25 Bitcoins per block at block height 210,000; the second was in 2016 when it dropped to 12.5 Bitcoins per block. In total, about 33 block halving events are expected with the last one expected to occur in the year 2141.

The aim of this derivative contract is to allow enthusiasts and gamblers bet on the date when the next block halving to 6.25 bitcoins per block will happen. Accordingly, this is estimated to occur at block height 630,000 and sometime in April 2020.

According to the blog post, the excitement is in the exact date when the halving will occur, it said: “The date the actual block will occur will also intrigue speculators and liquidity providers”, which will have a huge consequence on the dynamics of Bitcoin’s price should it become widely used.

So far, such derivatives as futures, options, and swaps are common within the industry, as has always been the case with traditional financial assets as well. However, the introduction of this derivative class increases the level of risk and uncertainty as a new determinant is introduced – block halving – and no one knows the precise date when it will occur, unlike the counterpart derivatives and this essentially makes its binary a fundamental economic risk.

If this is readily adopted by the crypto community en masse, it may as well “materially impact planning for investments and operations”, LedgerX suggests.

Intriguing enough, this may be another attempt to lure in sophisticated investors with a higher inclination towards binary options. However, for risk-averse investors, the sidelines may be cramped to see how Bitcoin survives the tempest, as this is likely to raise the volatility index for Bitcoin if it is adopted.

It’s been observed that with a new Bitcoin derivative class introduced, the cryptocurrency market takes a jolt. This may as well introduce another bull as with the case of CME and CBOE’s introduction of futures contracts in 2017 – which was first of its kind, and it saw Bitcoin reaching highs of USD 20,000.

Moreover, last year saw price fluctuations when the community expected Bitcoin exchange-traded funds (ETFs) to become a norm within the crypto community. However, when expectations were cut short elucidated by nine rejected ETF applications by the SEC, conversely, the market took a hit.

The onramp towards complex markets continues on the rise, with each provider targeting the institutional class of investors which are perceived to be pivotal to the next uptrend in the crypto market.

 

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