LONDON (Reuters) – When bitcoin was born, it was a symbol of counterculture, a revolt currency with close anonymity and lack of regulation. A decade later, the growing sign it enters into the creation that its creators attempted to undermine.
FILE PHOTO: An electric card showing exchange rate between South Korean winner and bitcoin at a crypto exchange in Seoul, South Korea December 13, 2017. REUTERS / Kim Hong-Ji / File Photo
Since the crypto course has increased in Verdi's larger investors , from trading companies to hedge funds, has increasingly turned to exchange regulated in traditional financial centers. They buy bitcoin futures to gain exposure to assets while avoiding the hacks and heists that plague the industry.
The Crypto market, which is associated with many with the dark path, money laundering and the West, is beginning to be discussed by financiers in the same breath as derivatives, hedging instruments and compliance.
Investors plowed record levels of money for bitcoin futures on regulated exchanges in the United States and the United Kingdom last month, hungry for a piece of action, but seeking the kind of protection that will satisfy their compliance officers.
Between March and May, bitcoin more than doubled in price, a rise peppered by double-digit price swings reminiscent of its 2017 bubble, which was driven by smaller retailers investors.
During that period, Chicago-based CME Group Inc.'s average daily volumes of forward contracts managed seven times to a record $ 508 million in May. The number of open interest rate contracts – those that are not settled – also hit a record.
CME said that bitcoins price gains and the subsequent increase in volatility increased new investors who wanted to risk.
Crypto Facilities, a London-registered platform bought this year for over $ 100 million of the large US crypto exchange Kraken, said the grocery bitcoin futures over three times from March to a record $ 84 million in May.
In a sign of the growing common market, the owner of the New York Stock Exchange, Intercontinental Exchange Inc (ICE) plans to offer bitcoin futures in the coming months through a new crypto trading platform, Bakkt.
"It is logical that they (institutional investors) want to move in this direction, especially considering their size and how much more it is at stake," says Joel Kruger, currency strategist at the LMAX Exchange Group.
Futures – financial contracts that lock buyers and sellers into trading an asset at a specific date and price – are considered key components of a mature market as they increase market liquidity and allow investors to invest in the direction of prices.
"It's a useful hedging instrument," said Daniel Matuszewski, Goldman Sachs-supported crypto company Circle's trading manager. "Futures are much easier to trade, much easier to use for hedging, much easier to exploit."
spiking demand is the emergence of a twin-track global bitcoin futures market – on "onshore" exchanges such as CME and "offshore" exchanges, which are more lightly regulated and still control head pairs the daily market with billions of dollars.
Purchasing Centers – those regulated in established financial centers – are usually subject to strict controls of management, technology and customer assessment. They require a high degree of openness.
Offshore platforms, on the other hand, are usually registered in jurisdictions with less stringent regulations. They tend to accept business from investors who can sign up with few checks on their identity or the proceeds of their funds.
Major investors, bound by strict compliance rules, go to regulated platforms at financial hubs such as CME, according to industry players. Traders with greater risk tolerance – including retail investors from North Asia and companies making money in cryptography, from miners to gaming companies – using offshore exchanges.
"Offshore exchange is not really exchange – they are more like private markets," said Vladimir Jelisavcic from the trading company Cherokee Acquisition in New York.
& # 39; STARS ARE WORKED & # 39;
Offshore exchanges have offered bitcoin futures since as early as 2011. One of the largest, Seychelles-registered BitMEX, says it now accounts for over 65% of global cryptocurrency derivative trading. The trading volumes were $ 4.3 billion in May, it said.
However, BitMEX CEO Arthur Hayes said larger investors were increasingly drawn to land-based exchanges like CME.
"It's the perfect product (for larger investors) – it's based on US dollars, they never have to touch actual bitcoin, it's financially settled," he said.
The launch of CME and rival Cboe Global Markets in December 2017 marked the first time mainstream exchanges offered cryptocurrency derivatives.
They initially experienced lukewarm demand. Cboe said in March, when bitcoin melted below $ 4,000, it planned to cancel its futures, with the final contracts expiring this month.
For its part, CME's futures have usually seen thin liquidity and high barriers to entry for smaller investors, says Ricky Li from crawler Altonomy in New York.
The Growing The gap in the futures market from land-based exchanges stimulates increasing competition and attracts new players, such as ICE.
Sui Chung, head of Crypto Facilities Crypto Competition Products, said that adherence to institutional investors had been assessing the various futures products offered by regulated exchanges for some time, as they expected a price increase to enter the market.
"This is the first time these stars have adjusted," he said.
Reporting by Tom Wilson; Editing by Pravin Char